What  of 

CHINA 


and 

JAPAN 


By  George  WoodruflF 


What  of 


CHINA  and  JAPAN? 


By 

George  Woodruff 


Because  of  the  great  interest  that  is  now  felt  in  Far 
Eastern  matters  and  at  the  request  of  many  members,  who 
wish  to  retain  Mr.  Woodruff’s  letters  from  the  Orient  in 
some  convenient  form,  the  Illinois  Chamber  of  Commerce 
has  had  a limited  number  of  these  books  printed  for  pri- 
vate distribution.  Some  of  the  matter  contained  herein 
has  already  been  published  in  The  Illinois  Journal  of 
Commerce  and  some  has  been  sent  out  to  members  in 
leaflet  form.  Now,  however,  for  the  first  time,  all  of  this 
material  has  been  condensed  into  a book  that  tells  in 
graphic  style  of  the  political  problems  and  ambitions  of 
the  two  great  nations  of  the  Far  East,  as  well  as  of  their 
financial  resources  and  commercial  opportunities. 


Published  by  tbe 
llinois  Chamber  of  Commerce 
1921 


Digitized  by  the  Internet  Archive 
in  2017  with  funding  from 
Columbia  University  Libraries 


https://archive.org/details/whatofchinajapanOOwood_0 


CHAPTER  I 


The  Form  of  Government 
in  Japan 


American  business  men  are  beginning  to  take  a very  great  interest  in  all 
foreign  trade  matters  and  the  members  of  the  Illinois  Chamber  of  Com- 
merce may  consequently  be  interested  in  a general  review  of  the  present 
political  and  business  conditions  in  the  Far  East. 

First  of  all,  it  is  perhaps  quite  important  that  consideration  be  given  to 
the  form  of  government  in  Japan  which  seems  to  be  very  much  like  the  Ger- 
man form  of  government  before  the  war. 

The  Mikado 

The  Mikado  is  supposed  to  be  a direct  descendent  of  the  Gods,  and  the 
people  of  Japan  believe  that  he  is  divine.  Pictures  of  the  Mikado  are  in  all 
of  the  houses,  and  a majority  of  the  people  bow  down  before  these  pictures. 
The  important  religions  are  Shintoism  and  Buddhism  and  both  teach  the 
divinity  of  the  Mikado.  The  people  have  been  taught  for  generations  to  be 
loyal  to  the  Mikado,  and  there  is  probably  no  country  on  earth  in  which  the 
people  are  so  solidly  loyal  to  their  ruler  and  their  government. 

The  Mikado  exercises  the  supreme  power,  and  his  will  is  practically  law. 
However  he  is  advised  in  important  matters  by  the  Privy  Council. 

The  Privy  Council  and  Elder  Statesmen 

The  Privy  Council  consists  of  thirty-nine  members,  and  its  functions  are 
purely  advisory.  This  Privy  Council  is  of  course  hand-picked,  and  it  represents 
the  ruling  classes,  and  the  vested  interests,  together  with  the  militarists.  In- 
side of  this  Privy  Council  there  developed  a clique  of  seven  men,  called  the 
Elder  Statesmen,  only  three  of  whom  are  now  active.  These  Elder  Statesmen 
actually  run  Japan.  Their  appointment  is  not  provided  for  in  any  of  the 
laws  of  Japan,  but  nevertheless  they  are  the  real  power  and  the  Mikado  and 
everybody  else  usually  follows  their  recommendations.  They  are  militarists 
and  they  control  the  army  and  navy.  They  sometimes  use  their  influence 
against  the  Cabinet  and  Diet  much  the  same  as  the  militarists  used  to  do  in 
Germany. 

The  Cabinet 

The  Cabinet  is  provided  for  in  the  constitution  and  the  direction  of  the 
country’s  affairs  is  supposed  to  be  largely  in  its  hands.  However  the  Prime 


3 


Minister  is  usually  recommended  by  the  Elder  Statesmen,  and  after  appoint- 
ment, he  forms  the  Cabinet.  The  Cabinet  is  not  responsible  to  the  Diet  but 
is  responsible  to  the  Mikado,  just  the  same  as  the  German  Cabinet  used  to 
be  responsible  to  the  Kaiser. 


The  Diet 

The  Diet  consists  of  two  houses — a House  of  Peers  and  a House  of  Repre- 
sentatives. The  Diet  has  power  to  pass  laws  but  these  laws  do  not  go  into 
effect  unless  and  until  they  are  approved  and  promulgated  by  the  Mikado. 
Under  certain  circumstances  the  Mikado  can  proclaim  laws  without  consulting 
the  Diet. 

The  House  of  Peers  is  composed  of  members  of  the  royal  family  and 
nobility,  representatives  of  the  army  and  navy  and  a number  of  manufacturers, 
financiers  and  business  men  representing  the  largest  tax  payers. 

The  House  of  Representatives  is  elected  by  the  people,  but  only  those 
male  Japanese  at  least  twenty-five  years  of  age  who  pay  a direct  tax  of  ten 
yen  ($5.00)  can  vote.  As  the  people  are  poor  there  are  not  very  many  men 
who  pay  this  tax,  and  consequently  o'Jt  of  a total  population  of  some  seventy 
millions  in  Japan  and  its  dependencies  less  than  three  million  can  vote.  Further- 
more many  of  these  are  prevented  from  voting  by  bribery,  and  dishonest 
election  methods  are  said  to  be  quite  customary. 

A writer  has  recently  said  that  “the  model  of  administration  is  not  the 
British  Parliament  or  the  American  Congress  but  the  United  States  Steel  Cor- 
poration, and  the  Standard  Oil  Co.”  Japan  is  apparently  owned  and  run 
by  less  than  two  hundred  thousand  men,  consisting  of  the  rulers,  the  militarists 
and  “the  interests.” 

The  people  seem  to  be  pretty  well  satisfied  with  this  form  of  govern- 
ment and  at  the  present  time  it  would  seem  that  a monarchy  is  better  suited  to 
the  needs  of  oriental  peoples  than  a republic.  However  there  is  a consider- 
able liberal  movement  in  the  country  and  the  advocates  of  real  constitutional 
government  will  some  day  overcome  the  Elder  Statesmen  and  the  militarists. 
The  struggle  between  these  two  forces  is  similiar  to  the  struggle  that  went  on 
in  Germany  before  the  war. 

In  international  affairs  the  Japanese  form  of  government  gives  to  Japan 
the  same  very  great  advantages  that  the  old  German  form  of  government  gave 
to  Germany.  Japan  is  able  to  adopt  international  policies  promptly  and  secretly 
and  to  strike  swiftly  and  effectively. 


4 


CHAPTER  II 


The  Expansion  of  Japan 


JAPAN  has  a very  large  population  and  the  Japanese  Islands  do  not  furnish 
sufficient  roomi  for  all  these  people,  particularly  as  the  population  is  in- 
creasing at  the  rate  of  about  700,000  per  year.  Between  five  and  six  million 
farmers  cultivate  the  land  but  their  average  farms  are  less  than  three  acres  in 
size  and  it  is  necessary  for  each  farmer’s  family  to  carry  on  some  form  of 
home  industry  in  order  to  make  both  ends  meet.  Furthermore,  industrial  condi- 
tions are  very  bad  and  the  wages  paid  are  very  small  so  that  the  masses  of  the 
people  are  very  poor  and  the  scale  of  living  is  of  course  very  low. 

Japan,  like  Germany,  felt  that  the  best  way  to  take  care  of  her  increasing 
population  was  to  expand  her  territory  and  send  colonists  out  of  Japan.  She 
felt  that  the  expansion  of  territory  was  particularly  necessary  because  her 
colonists  were  not  welcome  in  the  United  States,  Canada  and  Australia. 

After  Japan  had  expanded  her  territory  somewhat  in  the  north  and  in  the 
south  she  learned  that  her  people  did  not  care  to  colonize  land  located  in  a 
cold  climate  or  in  the  tropics.  The  Japanese  thrive  best  in  a warm,  temperate 
climate  and  consequently  the  rulers  of  Japan  changed  their  plans  somewhat 
and  decided  that  their  increasing  population  should  be  supported  by  the  de- 
velopment of  industrialism  the  same  as  had  been  done  in  England.  Japan 
has  consequently  continued  to  expand  her  territory  with  the  idea  of  merely 
governing  her  dependencies,  obtaining  raw  materials  therefrom  and  developing 
trade  therein.  Under  this  plan  officials,  traders,  business  men  and  a com- 
paratively small  number  of  colonists  have  gone  into  the  countries  that  have 
been  taken  over  by  Japan,  and  have  developed  a demand  for  Japanese  goods 
that  has  made  possible  the  more  rapid  growth  of  industry  at  home. 

The  Chinese  War 

For  many  years  Japan  and  China  both  endeavored  to  control  Korea, 
and  finally  in  1895  Japan  picked  a quarrel  with  China  and  declared 
war.  This  war  was  a short  one  because  Japan  was  thoroughly  prepared  and 
China  was  not.  As  a result  of  the  war  the  influence  of  Japan  was  recognized 
in  Korea,  the  island  of  Formosa  was  ceded  to  her  and  she  was  given  territory 
at  Port  Arthur  in  southern  Manchuria.  Russia,  France  and  Germany  pro- 
tested against  Japan  receiving  Port  Arthur  as  they  said  it  would  threaten 
Chinese  independence  and  might  disturb  the  peace  of  the  Far  East.  As  a 
consequence  Japan  was  compelled  to  give  up  Port  Arthur. 


5 


European  Expansion 

Within  a short  time  Japan  was  astonished  to  receive  word  that  Russia  had 
decided  to  take  possession  of  Port  Arthur  herself  and  at  about  the  same  time 
Germany  took  possession  of  territory  in  Shantung  province,  France  extended 
her  holdings  in  the  south  of  China  and  Great  Britain  joined  in  the  game  and 
added  to  her  various  holdings  of  Chinese  territory. 

Japan  promptly  decided  that  the  only  way  to  be  respected  in  the  world 
was  to  possess  warships  and  armament  and  she  immediately  began  to  equip 
herself  from  a military  standpoint. 

The  Russian  War 

After  a few  years  Russia  began  to  try  to  push  Japanese  influence  out 
of  Korea  and  finally  in  1905  Japan  declared  war  against  Russia  and  to  the 
surprise  of  the  world  the  Japanese  were  everywhere  triumphant  on  both  land 
and  sea. 

As  a result  of  the  war  Japan’s  influence  over  Korea  was  conceded  and 
she  also  got  Port  Arthur  and  took  over  Russian  interests  in  southern  Manchuria 
and  eastern  Mongolia. 

Japan  was  particularly  interested  in  getting  a foothold  in  Manchuria 
for  here  could  be  found  both  iron  and  coal  and  Japan  was  in  need  of  both 
iron  and  coal  in  order  that  she  might  become  a great  industrial  nation. 
Furthermore  Manchuria  and  hlongolia  contain  many  other  valuable  raw 
materials  and  the  opportunities  for  Japanese  colonization  in  these  two  provinces 
are  very  fairly  good.  While  these  two  provinces  are  still  supposed  to  be- 
long to  China,  nevertheless  the  Japanese  control  them  to  a very  large  ex- 
tent and  Chinese  sovereignty  is  fast  becoming  a fiction. 

After  the  Russian  war  Japan  repeatedly  stated  that  she  would  respect  the 
independence  of  Korea  although  insisting  that  her  influence  in  that  country 
must  be  respected  by  other  countries.  Flowever,  Japan  gradually  took  over 
the  government  of  Korea  and  finally  annexed  the  country.  Many  Europeans 
and  Americans  protested  against  this  annexation,  but  Japan  claims  that  she  only 
did  what  England  has  done  in  Egypt  and  what  many  other  European  countries 
have  done  in  various  parts  of  the  world. 

Japan  has  made  great  improvements  in  Korea  but  she  has  nevertheless 
proved  herself  to  be  a poor  colonizer,  because  she  has  never  won  over  the 
people  of  Korea  who  are  still  sullen  and  watchful  for  an  opportunity  to  regain 
their  independence. 

Siberia 

During  the  world  war  the  Allies  and  the  Japanese  sent  an  expedition 
into  Siberia.  The  Allies  finally  withdrew  their  soldiers  from  the  country  but 
the  Japanese  are  still  there  and  it  looks  as  though  they  may  intend  to  en- 
deavor to  permanently  extend  their  influence  over  all  of  Siberia  as  far  west  as 
Lake  Baikal  but  such  an  arrangement  might  very  possibly  bring  about  a 
future  second  Russian- Japanese  war. 

Encroachment  on  China 

Since  China  became  a Republic  her  government  has  been  more  chaotic 
than  when  she  was  a Monarchy,  and  constant  changes  in  the  administration 
have  taken  place.  The  Japanese  have  been  fully  alive  to  the  situation  and 
it  is  claimed  that  their  influence  over  the  Peking  government  is  very  great. 


6 


Certain  it  is  that  their  traders  and  business  men  have  been  spreading  all  over 
China  and  that  they  maintain  Japanese  garrisons  in  many  Chinese  cities. 

The  Japanese  of  course  control  the  Shantung  peninsula  which  they  took 
away  from  Germany  and  they  have  also  declared  a sphere  of  influence  over 
Fukien  province  which  is  opposite  the  island  of  Formosa. 

Many  Japanese  business  men  believe  that  in  the  future  raw  materials  will 
come  from  Manchuria,  Mongolia  and  Siberia,  will  be  manufactured  in  the 
factories  of  Japan,  and  will  be  sold  in  the  markets  of  China.  It  is  hoped  by 
these  Japanese  that  Japan  will  own  the  sources  of  raw  materials  and  that 
her  influence  in  China  will  be  so  supreme  as  to  give  her  something  of  a 
monopoly  in  the  Chinese  markets. 

Acquisition  of  Islands 

Ever  since  Japan  became  a modern  nation  she  has  been  acquiring  from 
time  to  time,  various  islands  scattered  up  and  down  the  coast  of  the  main- 
land of  Asia  until  at  the  present  time  she  owns  a chain  of  islands  extending 
from  Kamchatka  to  the  Philippine  Islands.  It  is  only  necessary  to  study 
a map  to  realize  the  strategic  strength  of  Japan’s  position  all  along  the  coast 
of  Asia.  Recently  Japan  has  extended  her  island  possessions  toward  the  south 
by  taking  over  from  the  Germans  the  Caroline  Islands  and  the  Marshall 
Islands  and  various  other  German  islands  located  north  of  the  Equator.  These 
new  possessions  include  the  Island  of  Yap  where  the  much  discussed  cable 
station  is  located. 


The  Open  Door 

For  many  years  the  United  States  has  stood  for  the  “Open  Door”  in 
China  and  Manchuria  and  all  of  the  nations  interested  in  the  Far  East  have 
consistently  supported  this  policy  in  theory.  However  in  practice  the  “Open 
Door”  is  a fiction  in  most  of  Manchuria  and  various  parts  of  China.  Before 
the  war  China  was  pretty  well  covered  by  the  spheres  of  influence  of  Russia, 
Japan,  Germany,  Great  Britain  and  France.  Japan  has  now  superceded  Ger- 
many and  has  at  least  temporarily  superceded  Russia.  The  influence  of  Japan 
in  China  has  gained  enormously  as  a result  of  the  war  while  the  in- 
fluence of  Great  Britain  and  France  has  suffered  in  some  ways.  The  tenden- 
cies of  the  last  few  years  would  seem  to  point  toward  the  closing  of  the  “Open 
Door”  and  the  monopolizing  of  the  Chinese  markets  by  a few  powerful  nations 
among  which  the  United  States  would  be  conspicuous  because  of  its  absence. 

A recent  attempt  to  assure  the  inclusion  of  United  States  business  men 
in  the  development  of  China  has  been  made  through  the  participation  of 
American  financiers  in  an  international  financial  Consortium  which  has  been 
planning  to  extend  necessary  loans  to  China  for  the  development  of  the  country. 

This  financial  participation  by  Americans  cannot  but  be  advantageous 
to  our  interests,  but  nevertheless  many  people  in  the  Orient  feel  that  the 
“Open  Door”  will  soon  disappear  except  in  theory  unless  new  international 
agreements  are  made  concerning  the  whole  Far  Eastern  situation. 

The  whole  question  of  the  Far  East  will  come  up  for  discussion  at  the 
International  Conference  called  by  President  Harding,  and  it  is  consequently 
very  important  that  American  business  men  familiarize  themselves  with  Far 
Eastern  conditions. 


7 


CHAPTER  III 


War  On  the  Pacific 


The  question  is  constantly  asked  all  around  the  Pacific  Ocean  as  to 
whether  the  United  States  and  Japan  will  eventually  fight  a great  war.  The 
United  States  feels  aggrieved  because  Japan  is  apparently  closing  the 
“Open  Door”  and  Japan  feels  that  she  has  several  grievances  against  the  United 
States. 


California  and  the  Japanese 

Japan  has  strongly  protested  on  various  occasions  against  the  laws  of 
California  which  have  discriminated  against  the  Japanese  and  have  made 
difficult  their  ownership  of  land  in  California.  These  laws  provide  that  land  can- 
not be  held  in  California  by  any  alien  who  is  not  entitled  to  become  natural- 
ized under  our  laws.  As  our  laws  provide  that  only  white  men  and  negroes  can 
become  naturalized  the  Japanese  are  of  course  barred  from  the  ownership  of 
land  and  the  Japanese  government  considers  that  this  is  racial  discrimination. 
They  point  out  the  fact  that  Turks,  Mexicans,  Hottentots  and  Zulus  can  own 
land  under  our  laws  but  the  Japanese  are  disqualified  because  they  belong  to 
the  yellow  race. 

The  Japanese  cannot  object  to  laws  that  bar  all  outsiders  from  owning 
land  for  they  have  passed  laws  that  prohibit  the  ownership  of  land  outside  of 
their  treaty  ports  by  any  aliens.  However  Japan  objects  to  the  discriminatory 
nature  of  our  laws  and  has  consistently  demanded  the  recognition  of  racial 
equality. 

At  the  coming  International  Conference  to  be  held  in  Washington  the 
question  of  racial  equality  will  undoubtedly  be  brought  up  and  it  might  do 
no  harm  and  might  on  the  other  hand  do  considerable  good  for  us  to  admit  the 
ipolitical  equality  of  the  white  and  yellow  races,  but  such  a declaration  by  us 
should  clearly  point  out  the  fact  that  our  e.xclusion  laws  and  land  laws  are  made 
necessary  by  economic  and  not  racial  considerations  and  therefore  could  not  be 
affected  by  our  admission  of  political  racial  equality.  Japan  caimot  logically  ob- 
ject to  this  position  for  she  herself,  for  economic  reasons,  bars  out  Korean  and 
Chinese  coolies  although  they  surely  enjoy  racial  equality  with  the  Japanese. 

As  a matter  of  principle  it  would  of  course  be  wise  for  us  in  America  to 
endeavor  to  frame  exclusion  laws  and  land  laws  so  that  they  will  be  general  in 
their  scope  instead  lof  being  apparently  aimed  against  any  one  race  or  nation. 

While  the  California  grievances  have  been  played  up  very  strongly  in 
Japan  and  while  Japan  is  of  course  intensely  interested  in  seeing  that  her  people 


8 


obtain  the  best  possible  treatment  in  America,  nevertheless  many  shrewd  men 
feel  that  Japan  has  used  very  good  diplomatic  strategy  in  keeping  our  attention 
riveted  on  California  while  she  was  making  her  great  advance  in  Manchuria, 
Mongolia  and  China. 

Opposition  to  Expansion 

The  Japanese  feel  that  the  United  States  has  always  opposed  Japanese 
expansion  on  the  main  land  of  Asia  or  in  any  other  direction.  They  point  to 
their  need  of  expansion  and  call  attention  to  the  fact  that  the  United  States 
has  not  seriously  objected  to  the  expansion  of  European  nations  in  Asia  and  in 
Africa.  They  furthermore  cite  the  fact  that  the  United  States  has  done  con- 
siderable expanding  herself  and  is  still  extending  her  domain  around  the  Carib- 
bean Sea. 

The  Japanese  feel  that  the  Americans  have  given  considerable  encourage- 
ment to  the  Koreans  in  their  agitation  for  independence  from  Japan  and  every- 
body in  America  knows  how  Japan  feels  about  our  opposition  to  Japanese  con- 
trol of  Shantung  and  our  position  concerning  Japanese  possession  of  the  Island 
of  Yap. 


Trade  Rivalry 

Japan  feels  that  because  of  her  geographical  position  she  is  entitled  to 
dominate  the  trade  of  eastern  Asia  and  as  her  business  men  and  traders  come 
into  competition  with  Americans  who  are  interested  in  trade  with  this  part 
of  the  world  there  naturally  results  numerous  causes  for  friction  and  bad  feeling. 

It  is  interesting  to  note  that  many  Japanese  feel  that  they  are  entitled 
to  exclusive  rights  on  the  main  land  of  Asia  and  there  is  considerable  talk 
of  a proposed  Japanese  policy  to  be  known  as  “Asia  for  the  Asiatics.”  This 
proposed  policy  is  said  to  be  justified  by  our  Monroe  Doctrine  but  upon 
examination  the  two  policies  are  found  to  be  entirely  different.  Under  our 
Monroe  Doctrine  we  do  not  keep  garrisons  permanently  in  South  America  nor 
do  we  interfere  with  the  internal  affairs  of  the  countries  south  of  us  nor  do 
we  take  any  steps  to  monopolize  their  trade  to  the  disadvantage  of  other 
nations.  All  of  these  things  are  being  done  by  Japan  in  China  and  it  is  pro- 
posed to  justify  this  policy  by  giving  it  the  attractive  title  of  “Asia  for  the 
Asiatics.”  If  Japan  would  declare  a real  Monroe  Doctrine  and  would  then 
carry  out  this  doctrine  as  we  carry  out  our  Monroe  Doctrine  the  United 
States  could  not  logic&lly  object  because  we  have  consistently  stood  for 
the  integrity  of  China  and  equal  opportunity  of  all  nations  to  trade  with  that 
country. 

Difficulties  of  Warfare 

Should  disagreements  between  the  United  States  and  Japan  grow  to  a 
point  where  warfare  was  seriously  considered  it  is  certain  that  both  countries 
would  realize  the  difficulties  of  waging  warfare  with  a nation  so  far  away. 
It  is  true  that  the  Philippines  are  at  present  a very  weak  point  and  could 
easily  be  taken  by  Japan  but  any  idea  that  the  Japanese  could  send  an 
army  across  the  Pacific  and  invade  the  United  States  is  nonsense.  Further- 
more any  idea  that  we  could  send  an  army  of  invasion  to  Japan  is  also  non- 
sense. The  Japanese  would  probably  take  the  Philippines  and  then  wait  for 
us  to  come  and  take  them  back.  We  would  probably  not  be  so  foolish  as  to 
try  to  take  them  back  but  would  have  our  navy  interfere  as  much  as  possible 
with  Japanese  trade  and  overseas  interests.  However  in  these  days  of  new 
military  and  naval  inventions  it  is  of  course  impossible  to  guess  as  to  how 


9 


such  a war  would  be  conducted,  but  it  is  certain  that  the  intervening  distance 
between  the  two  nations  would  make  warfare  difficult  and  would  consequently 
constitute  a strong  reason  for  the  maintenance  of  peace. 

Financial  Losses  of  a War 

The  financial  losses  of  a war  would  of  course  be  serious  for  the  United 
States  but  would  be  disastrous  for  Japan.  We  are  Japan’s  best  customer  and 
it  would  bring  bankruptcy  to  many  lines  of  business  if  Japan  were  to  fight 
her  best  customer.  Furthermore  she  buys  from  us  great  quantities  of  essential 
raw  materials  without  which  a great  part  of  her  industry  would  suffer  a 
considerable  collapse. 

The  financing  of  such  a war  would  seem  to  be  entirely  beyond  the  power 
of  a people  who  are  already  very  heavily  taxed  and  who  are  living  largely 
from  hand  to  mouth.  Before  the  world  war  it  was  suggested  that 
either  Germany  or  Russia  might  finance  a war  against  the  United  States 
by  the  purchase  of  Japanese  bonds  but  the  conditions  are  now  completely 
changed  and  the  only  market  in  the  world  where  large  issues  of  government  ob- 
ligations can  be  absorbed  is  in  the  United  States.  Then,  too,  the  fact  should 
not  be  lost  sight  of  that  in  a war  between  the  United  States  and  Japan  the 
interests  of  Canada  and  Australia  would  be  just  the  same  as  the  interests  of 
the  United  States,  and  this  situation  would  insure  the  support  of  Great 
Britain  during  the  contest.  Japan  is  unpopular  in  China  and  is  constantly 
having  trouble  with  the  natives  of  Korea,  and  it  is  consequently  permissible  for 
us  to  presume  that  the  influences  of  the  mainland  of  Asia  would  be  on  our  side. 

No  War  in  the  Near  Future 

After  studying  the  situation  in  the  Far  East  it  woifld  indeed  seem  very 
unlikely  that  there  will  be  any  war  between  the  United  States  and  Japan 
until  the  passing  years  have  brought  great  changes  in  fundamental  conditions 
in  this  part  of  the  world.  We  should  however  always  keep  in  mind  the  fact 
that  Japan  is  controlled  by  a military  clique  much  the  same  as  was 
Germany  and  that  this  clique  is  not  responsible  to  the  people  but  is  never- 
theless all  powerful.  If  these  men  should  so  far  lose  their  heads  as  to  believe 
that  a great  war  would  be  to  the  ultimate  advantage  of  Japan,  international 
trouble  might  very  possibly  ensue. 

It  would  seem  as  though  the  United  States  should  not  be  overawed  by 
the  thoroughly  advertised  military  genius  of  the  Japanese,  remembering  that 
while  they  have  a great  army  and  an  efficient  navy,  they  have  nevertheless 
fought  but  two  wars  in  modern  times,  one  against  the  unprepared  Chinese 
and  the  other  against  the  corrupt  and  poorly  led  Russian  forces  operating 
many  thousands  of  miles  from  home.  The  policy  of  the  United  States  in  the 
Far  East  should  be  strong,  but  on  the  other  hand  it  should  be  carefully  based 
on  policies  that  are  absolutely  fair  to  Japan  and  every  effort  should  be  made 
for  disarmament  and  mutual  understanding  for  on  good  feeling  and  agree- 
ment between  these  two  great  countries  the  peace  of  the  world  largely  depends. 


10 


CHAPTER  IV 


The  Western  Side  of  the  Pacific 


A MAP  of  the  Western  Side  of  the  Pacific  Ocean  shows  Siberia  at  the  north, 
then  Manchuria  and  Korea,  after  which  comes  the  Republic  of  China. 
South  of  China  are  the  Philippine  Islands,  Borneo,  Celebes  and  New 
Guinea  and  farther  to  the  south  are  Australia  and  New  Zealand.  The  affairs 
of  all  of  these  countries  are  interwoven  in  the  Far  Eastern  question  and  it  may 
be  of  interest  to  note  what  parts  of  these  great  stretches  of  territory  are  of 
particular  interest  to  the  United  States. 

First  of  all  it  must  be  admitted  that  the  future  development  and  trade 
of  Siberia  is  of  some  interest  to  us  but  Siberia  has  been  looked  upon  as  the 
permanent  possession  of  Russia  and  we  have  consequently  never  felt  that 
we  possessed  any  vital  interests  in  the  country.  If  there  is  to  be  a change 
in  the  status  of  Siberia  we  are  of  course  anxious  to  see  that  our  business 
men  receive  fair  treatment  in  that  great  section  of  Asia  but  nevertheless  we 
cannot  expect  that  there  will  be  a trade  of  great  magnitude  with  Siberia  for  a 
considerable  number  of  years  to  come. 

Korea  is  now  a part  of  Japan,  and  Manchuria,  including  eastern  Mon- 
golia, is  already  generally  acknowledged  to  be  under  the  domination  of  the 
Japanese.  In  these  countries  we  could  develop  a large  trade,  but  their  political 
biWiation  with  Japan  is  now;  so  close  that  we  cannot  expect  to  obtain 
more  than  a small  part  of  the  business  originating  there. 

The  Republic  of  China  constitutes  a vast  land  of  opportunity  for  Amer- 
icans for  here  must  be  carried  on  enormous  development  works  and  a tre- 
mendous volume  of  trade.  Japan  is  already  endeavoring  to  control  the  north 
of  China  including  Shantung  province.  Great  Britain  has  spread  her  in- 
fluence over  the  central  part  of  the  nation  and  also  over  various  harbors  up 
and  down  the  coast.  Farther  to  the  south  Japan  has  declared  a sphere  of  in- 
fluence over  Fukien  province.  Great  Britian  has  her  holdings  at  Hong 
Kong,  and  the  extreme  southern  part  of  the  Republic  is  dominated  by  France. 

The  Philippine  Islands  are  owned  by  the  United  States,  and  Borneo, 
Celebes  and  New  Guinea  are  owned  by  Holland  and  Great  Britain.  Australia 
and  New  Zealand  are  parts  of  the  British  Empire  and  we  could  of  course  ex- 
pect no  great  changes  in  our  trade  relations  with  those  countries,  which  re- 
lations, by  the  way,  are  quite  satisfactory. 

As  we  look  up  and  down  the  western  side  of  the  Pacific  we  must  realize 
that  China  is  the  country  of  importance  for  us.  Erom  our  standpoint  it 

11 


might  almost  be  said  that  under  present  conditions  China  is  the  only  part  of  the 
western  side  of  the  Pacific  worth  seriously  squabbling  about. 

Future  American  Policy 

If  some  satisfactory  arrangement  can  be  worked  out  in  Washington  so  that 
the  integrity  of  the  eighteen  provinces  of  China  can  be  maintained  and  orderly 
government  developed  and  equal  business  opportunities  extended  to  all  nationali- 
ties it  might  be  advisable  to  frankly  recognize  the  need  for  Japanese  expansion  in 
Manchuria  and  eastern  Mongolia,  provided  however,  that  the  foolish  arma- 
ment race  between  the  nations  can  be  terminated  and  disarmament  be 
gradually  brought  about.  Under  such  conditions  peace  and  good  will  should 
prevail  in  the  Far  East,  and  undreamed  of  development  should  take  place  in 
that  part  of  the  world  during  the  next  generation,  in  which  development  the 
United  States  would  take  a very  considerable  and  a very  helpful  part. 

If  the  Washington  Conference  does  not  work  out  a satisfactory  arrange- 
ment in  connection  with  the  Far  Eastern  situation,  then  the  United  States 
must  make  up  its  mind  to  do  one  of  two  things,  either  to  withdraw  entirely  from 
any  large  participation  in  Chinese  affairs  and  leave  the  country  to  the  tender 
mercies  of  those  nations  that  are  already  on  the  ground,  or  else  continue  to 
strengthen  our  naval  policy,  adopt  a strong  position  and  be  prepared  if  neces- 
sary to  make  a show  of  force. 

The  Philippines 

If  the  old  competitive  spirit  backed  up  by  force  is  to  continue  to 
prevail  and  if  the  United  States  were  to  decide  to  withdraw  from  any  serious 
participation  in  the  resulting  contest,  the  Philippine  Islands  would  doubt- 
less prove  to  be  a considerable  burden  to  us,  and  the  sale  of  these  Islands  to 
Great  Britain,  France  or  Holland,  all  of  which  countries  have  possessions  near 
them,  would  seem  to  be  advantageous  from  our  standpoint,  particularly  if  we 
were  able  to  arrange  for  an  exchange  of  the  British,  French  and  Dutch 
possessions  in  and  around  the  Caribbean  Sea.  If  on  the  other  hand  we  were 
to  decide  that  our  enormous  economic  strength  and  our  ability  to  maintain  a 
great  navy  justified  us  in  joining  in  the  scramble,  then  the  Philippine  Islands 
might  prove  to  be  a very  valuable  possession,  located  as  they  are  at  about  the 
center  of  the  western  side  of  the  Pacific.  However  it  would  be  necessary  for 
us  to  strongly  fortify  the  Philippines  and  maintain  a great  naval  base  at  Guam. 

Congress  has  promised  independence  to  the  Philippines,  but  nobody 
in  the  East  believes  that  they  can  be  given  independence  for  many  years  to 
come.  There  are  over  three  thousand  islands  in  the  Philippine  group,  in- 
habited by  some  ten  million  natives  belonging  to  many  races  and  speaking 
many  different  languages.  Of  course  very  few  of  these  natives  are  in  any 
way  educated  and  it  is  hard  to  understand  how  such  a mixed  mass  of  back- 
ward people  can  safely  be  given  their  independence.  Well  informed  people 
believe  that  Philippine  independence  would  merely  result  in  the  exploitation  of 
the  natives  by  the  small  but  shrewd  political  group  that  already  completely 
dominates  the  local  politics  of  the  Islands,  and  it  is  believed  that  in  the  end 
Japan  or  some  other  nation  would  find  an  excuse  for  taking  the  Islands  over. 


12 


CHAPTER  V 


Business  Conditions  in  Japan 


Business  men  in  japan  have  recently  experienced  the  same  ups  and  downs 
in  business  as  have  Americans.  During  the  war,  and  for  some  time  follow- 
ing the  armistice,  Japan  did  an  enormous  export  business,  and  large  amounts 
of  gold  were  consequently,  acquired.  This  gold  served  as  a basis  for  great 
inflation,  bank  loans  were  increased,  the  circulating  note  issue  was  enlarged 
and,  of  course,  costs,  wages  and  prices  all  went  rapidly  up. 

The  Panic  of  1920 

In  the  early  spring  of  1920  the  banks  realized  that  prices  had  risen  to 
a point  beyond  all  reason  and  they  began  to  feel  that  any  sudden  shrinkage 
in  values  would  greatly  embarrass  many  of  their  customers.  Furthermore 
they  found  that  they  had  extended  about  all  of  the  credit  that  it  was 
possible  to  extend  and  consequently  they  began  to  exercise  great  care  in 
scrutinizing  their  loans.  This  carefulness  on  the  part  of  the  bankers  served 
as  a warning  to  business  men  and  it  began  to  be  realized  that  prices  had 
gone  far  beyond  true  values.  In  order  to  get  themselves  into  a stronger  posi- 
tion some  of  the  business  men  began  to  sell  silk  and  the  price  soon  com- 
menced to  crumble.  This  price  decline  continued  until  silk  that  had  been 
selling  for  around  forty-five  hundred  yen  per  bale  finally  sold  for  less  than 
fifteen  hundred  yen  per  bale.  This  enormous  shrinkage  in  Japan’s  chief  ex- 
port staple  carried  down  the  price  of  practically  everything  else,  causing  many 
failures,  brought  about  the  closing  of  a large  and  important  bank,  and  re- 
sulted in  the  temporary  closing  of  the  principal  exchanges  of  the  country. 
Japan  experienced  a good  old  fashioned  American  panic. 

Fall  of  Silver — Artificial  Prices 

Japan’s  difficulties  were  made  worse  by  the  great  fall  in  the  value  of 
silver  because  Japan  sells  a large  part  of  her  exports  to  China  and  other 
countries  that  are  on  a silver  basis.  The  business  man  in  China  who  had  a 
considerable  amount  of  silver  on  deposit  in  the  banks  found  that  this  silver  was 
worth  less  than  half  of  its  former  value  in  gold  standard  countries  like  Japan. 
With  the  export  market  practically  dead,  and  with  many  failures  taking  place 
it  was  of  course  necessary  to  close  down  many  Japanese  factories  and  to  throw 
many  men  out  of  work.  However  labor  in  Japan  is  able  to  shift  itself  more 
easily  than  labor  in  America,  and  many  of  these  working  men  went  back  to  the 
country  or  secured  some  form  of  temporary  low  paid  employment.  This 
situation  made  it  possible  to  maintain  a fairly  active  honie  market,  and 


13 


alleviated  some  of  the  difficulties  of  the  situation.  Furthermore  the  govern- 
ment took  aggressive  action  and  attempted  to  stop  the  decline  in  the  price 
of  some  of  the  important  staples.  The  government  arranged  to  peg  the 
price  of  silk  at  fifteen  hundred  yen  per  bale.  It  financed  a pool  that  has 
bought  and  held  large  quantities  of  rice.  It  advanced  money  to  industries  in 
need  of  help,  and  it  urged  a decrease  in  the  production  of  silk,  rice,  and 
other  important  products  in  order  that  it  might  be  easier  to  maintain  prices. 

The  Government  in  Business 

It  is  quite  surprising  to  Americans  to  learn  how  close  the  government  is  to 
business  in  Japan.  Not  only  is  business  backed  up  in  every  way  but  the 
government  itself  is  directly  interested  in  many  lines  of  business  endeavor. 
The  government  runs  the  post  office,  the  telephone  and  telegraph,  the  railways, 
and  many  of  the  utilities.  It  also  owns  the  tobacco  monopoly,  the  salt  mono- 
poly, the  camphor  industry  and  controls  various  banks,  shipyards,  warehouses 
and  industrial  plants  and  has  not  neglected  to  secure  the  control  of  news- 
papers and  other  means  of  publicity.  In  Japan  it  is  against  the  law  to  talk 
or  preach  socialism  and  any  attempt  along  this  line  is  promptly  suppressed. 
It  is  odd  that  in  such  a country  state  socialism  should  have  gained  such  an 
impetus.  Perhaps  this  may  be  explained  by  the  fact  that  the  state  owned  in- 
dustries do  not  seem  to  be  operated  for  the  benefit  of  the  “proletariat.” 

Cost  of  Living — Labor  Unions — Strikes 

Although  wholesale  prices  and  the  prices  of  raw  materials  have  tended 
constantly  downward,  nevertheless  retail  prices  have  not  followed  suit  and 
this  is  causing  great  discontent.  It  seems  that  each  line  of  business  is 
organized  in  a guild  and  these  guilds  have  broad  powers  over  their  mem- 
bers. It  is  claimed  that  the  retail  guilds  have  issued  orders  to  their  mem- 
bers to  maintain  prices  at  a fairly  high  figure  and  as  a result  the  retailers 
have  been  “profiteering”  and  the  public  has  been  footing  the  bill.  The 
working  men  also  have  their  guilds  but  they  have  not  held  wages  at  a high 
enough  figure  to  satisfy  the  workmen  and  consequently  many  of  the  work- 
men are  endeavoring  to  form  labor  unions.  It  is  against  the  law  to  organize 
labor  unions  in  Japan  but  nevertheless  some  labor  unions  are  being 
established  and  a large  number  of  strikes  are  taking  place.  These  strikes 
are  practically  all  called  for  the  purpose  of  getting  increased  wages.  The 
men  do  not  strike  for  shorter  hours  or  for  changes  in  conditions  of  manage- 
ment. At  the  present  time  wages  are  said  to  be  very  high,  but  they 
seem  very  low  to  us.  For  instance,  carpenters  receive  less  than  $1.50  per  day 
and  street  car  conductors  get  less  than  fifty  cents  per  day  for  a 10  or  12 
hour  day.  However  there  is  a tremendous  amount  of  loafing  on  the  job  as 
a result  of  which  it  is  said  that  labor  costs  about  as  much  in  Japan  as  in  America. 

The  unusual  activity  of  labor  leaders  in  Japan  has  had  a tendency  to 
keep  wages  up  and  this  has  been  a considerable  factor  in  keeping  up  costs 
and  also  retail  prices. 

Influence  of  the  Banks 

The  bankers  of  Japan  have  favored  measures  that  would  hold  up  values 
as  in  this  way  they  hoped  to  limit  the  number  of  insolvencies.  The  Japanese 
banks  belong  to  an  organization  called  “The  Associated  Banks  of  Japan” 
and  this  association  makes  rules  that  are  obeyed  by  the  members  and  ex- 
ercises very  wide  powers  over  financial  conditions.  This  organization  has 
recently  come  to  realize  that  you  cannot  “keep  your  apple  and  eat  it  too.” 
In  other  words  prices  cannot  be  held  up  in  Japan  in  order  to  keep  Japanese 


14 


business  men  solvent  and  at  the  same  time  a great  export  campaign  be  pushed 
on  the  necessary  basis  of  low  prices  to  foreign  buyers. 

More  Liquidation  Necessary 

The  chambers  of  commerce  are  well  organized  and  exert  considerable  in- 
fluence on  public  opinion.  They  have  been  pointing  out  the  necessity  for  com- 
plete liquidation  and  have  urged  the  business  men  to  reduce  costs  in  order 
that  competition  may  be  successfully  met  in  the  export  field.  Exporters  state 
that  American  and  European  competition  is  becoming  very  keen  and  that  new 
manufacturing  industries  in  China  are  quoting  prices  lower  than  Japanese 
prices. 


Prosperity  Will  Return  Slowly 

A further  broad  re-adjustment  to  new  conditions  must  come  about  in 
Japan,  as  a result  of  which  the  domestic  market  will  be  placed  on  a sounder 
basis  and  the  export  trade  will  be  able  to  quote  better  prices.  The  financial 
situation  in  Japan  is  constantly  improving  but  there  are  still  surplus  stocks 
of  goods  on  hand  and  a real  business  revival  depends  on  a prosperous  ex- 
port trade.  However,  prosperity  in  the  export  trade  will  return  slowly  and 
it  would  appear  that  Japan  must  exercise  patience  and  do  some  more 
house  cleaning  before  a permanent  period  of  prosperity  can  be  expected. 


15 


CHAPTER  VI 


American  Trade  in  Japan 


Americans  have  been  selling  great  quantities  of  raw  materials  and  con- 
siderable quantities,  of  manufactured  goods  in  Japan  for  some  years  and 
while  great  trade  possibilities  exist,  nevertheless  there  are  various  difficul- 
ties that  must  be  taken  into  consideration  in  connecton  with  the  introduction  of 
goods  into  the  Japanese  market  at  the  present  time. 

Business  Depression 

First  of  all,  the  country  is  suffering  from  the  severe  business  depression. 
The  government  and  the  banks  in  endeavoring  to  hold  up  wholesale  prices  to 
prevent  insolvencies  among  business  men,  prevented  the  healthy  liquidation 
of  the  cost  of  living.  The  high  cost  of  living  has  held  up  production  costs, 
and  this  is  making  it  particularly  difficult  for  Japan  to  sell  goods  in  the 
present  depressed  export  market.  It  would  look  as  though  business  conditions 
must  become  worse  before  they  can  become  better,  and  in  the  meantime  the 
buying  power  of  the  country  may  become  less  than  at  present. 

Unfriendliness 

Another  factor  usually  considered  by  business  men  in  America  is  the 
unfriendly  feeling  toward  our  country  held  by  many  Japanese,  notwithstanding 
the  fact  that  most  Japanese  business  men  realize  that  the  United  States  is 
Japan’s  best  customer,  and  that  friendly  relations  should  accordingly  be 
cultivated.  After  reading  daily  translations  of  the  leading  Japanese  news- 
papers the  average  American  would  not  blame  the  people  for  feeling  un- 
friendly toward  us,  since  many  papers  are  jammed  full  of  propaganda  adverse 
to  us,  and  the  people  are  led  to  believe  that  we  are  a selfish,  grasping,  military 
nation,  .below  the  Japanese  in  civilization. 

The  Washington  Conference  will  furnish  an  opportunity  for  adjusting  the 
chief  points  of  difference  between  the  United  States  and  Japan,  but  we  must 
speak  frankly  and  make  our  position  very  clear.  The  older  commercial  nations 
of  the  world  have  been  treating  the  Japanese  somewhat  like  children.  They 
have  praised  their  accomplishments,  passed  over  their  deficiencies  and  been 
very  careful  not  to  hurt  their  tender  sensibilities.  Straight  talk  and  firm  action 
will  do  more  to  clear  up  American- Japanese  misunderstandings  than  polite 
phrases,  complimentary  e.xpressions  and  timid  tactics. 

Our  business  men  should  most  carefully  watch  the  relations  between  our 
country  and  Japan,  but  the  present  situation  should  not  deter  us  from  en- 
tering the  Japanese  markets,  for  war  at  the  present  time  is  practically  out 


16 


of  the  question  and  agreements  satisfactory  to  both  countries  will  very  prob- 
ably be  eventually  worked  out. 

Temporary  Nature  of  Market 

It  is  often  claimed  that  the  Japanese  market  is  merely  a temporary  one, 
inasmuch  as  the  Japanese  intend  to  eventually  manufacture  for  their  own  re- 
quirements. However,  it  must  be  remembered  that  a considerable  number 
of  years  must  pass  before  Japanese  manufacturing  can  become  very  greatly 
diversified.  At  present  there  are  25,000  factories  in  Japan  and  some  two 
million  hands  are  normally  employed,  but  the  number  of  lines  covered  is 
comparatively  small  and  the  lack  of  machinery  and  experience  makes  it  fairly 
difficult  for  new  lines  to  be  developed.  Furthermore,  labor  is  beginning  to 
demand  modern  conditions  and  it  would  not  be  surprising  if  a general  manu- 
facturing readjustment  were  to  become  necessary  during  the  next  few  years. 

The  market  for  manufactured  goods  and  machinery  will  doubtless  remain 
open  to  foreign  manufacturers  for  a considerable  number  of  years  to  come, 
and  the  market  - for  raw  materials  would  seem  to  be  on  a particularly  perma- 
nent basis,  although  Japanese  activities  on  the  mainland  of  Asia  may  in  time 
make  it  possible  for  Japan  to  there  obtain  many  of  the  raw  materials  needed. 

Dishonest  and  Unethical  Practices 

Many  American  business  men  have  hesitated  to  do  business  with  the 
Japanese  because  of  the  reputation  they  have  acquired  for  dishonest  methods, 
such  as  appropriating  trade  marks,  disregarding  patent  rights,  cancelling  con- 
tracts, refusing  to  accept  shipments,  etc.  We  must  remember,  however,  that  until 
recently  a man  engaged  in  trade  in  Japan  was  looked  down  upon  and,  conse- 
quently, high  class  men  were  not  very  often  encountered  in  trade  transactions. 
This  situation  has  largely  changed,  but  nevertheless,  Japanese  business  men  of 
today  are  suffering  for  some  of  the  sins  of  the  past  as  well  as  those  of  the 
present.  Very  little  difficulty  on  this  score  will  be  experienced  in  Japan 
if  American  business  men  will  use  proper  caution  in  checking  up  the 
standing  of  the  people  with  whom  they  propose  to  do  business,  for  there 
are  many  strong  and  honorable  firms  in  all  lines  of  business  in  the  Empire 
of  the  Mikado. 

Exchange 

During  these  days  of  wildly  fluctuating  foreign  exchange,  exporters  to 
Japan  are  of  course  vitally  interested  in  the  value  of  the  Japanese  yen.  Dur- 
ing the  war  Japan  became  a creditor  country  for  a short  time  and  the  yen  was 
quoted  at  a premium  over  the  American  dollar.  However,  Japan  is  no  longer 
a creditor  country  far  the  balance  of  trade  has  turned  against  her  and  the  yen 
has  fallen  to  a small  discount,  but  this  discount  is  not  large  when  the  adverse 
trade  balance  is  taken  into  consideration  and  allowance  made  for  the  fact 
that  Japan  has  been  buying  in  her  own  government  bonds  in  the  New  York 
and  London  markets.  The  fact  that  the  yen  has  not  fallen  lower  leads  ta  a 
strong  suspicion  that  it  is  “pegged”  by  the  Japanese  government.  Japan  holds 
plenty  of  gold  and  it  would  not  be  necessary  for  the  government  to  support 
the  exchange  were  it  not  for  the  fact  that  there  is  an  embargo  on  the  ship- 
ment of  gold  from  the  country  and  it  is  therefore  impossible  for  the  bankers 
to  hold  up  exchange  through  gold  exports.  If  the  government  has  pegged 
the  exchange,  then  Japan  must  be  releasing  some  of  the  gold  that  is  held  in 
foreign  countries,  notwithstanding  the  fact  that  gold  is  not  allowed  to  be 
shipped  out  of  Japan. 


17 


There  would  appear  to  be  little  danger  of  any  demoralization  in  Japanese 
exchange,  although  it  will  certainly  be  necessary  for  Japan  to  release  consider- 
able gold  in  order  to  offset  the  adverse  trade  balance,  but  a domestic  readjust- 
ment to  a lowier  price  level  will,  after  awhile,  make  it  possible  for  Japan  to 
increase  her  export  of  goods  and  this  will,  of  course,  lessen  the  demands 
for  her  gold.  However,  it  would  be  well  to  keep  in  mind  the  fact  that  Japan 
will  remain  a debtor  country  for  a long  time,  and  that  she  must  consequently 
borrow  money  abroad  or  ship  gold,  and  a considerable  change  in  the  financial 
situation  may  very  possibly  develop  some  time  in  the  not  distant  future. 

How  to  Sell  Goods 

In  proceeding  to  introduce  manufactured  goods  into  Japan  it  is  possible 
to  make  arrangements  with  reliable  American  or  Japanese  trading  com- 
panies, but  as  these  companies  handle  a multitude  of  lines,  an  able  represen- 
tative should  occasionally  be  sent  to  Japan  to  create  interest  in  the  goods  being 
sold  and  make  sure  that  the  trading  company  is  properly  pushing  the  line. 

The  greatest  success  will  be  obtained  by  opening  a modest  office  in 
Japan  and  sending  over  a representative.  The  office  must  be  opened  with 
the  idea  of  permanence,  and  the  representative  must  be  a high-class,  well 
educated  gentleman  who  will  be  able  to  develop  a good  social  position,  and 
who  will  go  to  Japan  with  the  idea  of  making  it  his  permanent  home.  The 
Japanese  are  great  believers  in  tradition  and  permanence,  and  this  idea  of 
permanence  must  be  played  up  strong  in  order  to  get  the  best  results.  If 
this  kind  of  an  arrangement  is  made  and  the  business  is  allowed  to  grow 
slowly,  it  doubtless  will  grow  surely. 

Some  American  concerns  have  entered  into  partnership  arrangements  with 
Japanese  distributors  but  most  of  these  arrangements  have  proven  unsatis- 
factory although  in  several  instances,  due  largely  to  the  unusual  personality 
of  the  American  representatives  sent  over,  partnership  arrangements  have 
worked  out  successfully. 

Perhaps  sometime  in  the  future  Americans  may  find  it  desirable  to 
organize  Japanese  corporations  for  the  purpose  of  carrying  on  manufacturing 
operations  in  Japan  in  the  same  way  that  we  now  organize  subsidiary  cor- 
porations for  the  purpose  of  operating  manufacturing  branches  in  Canada. 

When  arrangements  for  proper  representation  in  Japan  have  been  made 
it  will  be  necessary  for  the  people  at  home  to  give  the  most  careful  attention 
to  the  goods  that  are  sent  out.  Goods  should  be  packed  in  such  a way 
as  to  be  conveniently  handled  by  coolies  or  on  the  backs  of  ponies,  and  due 
consideration  must  be  given  to  local  good  luck  signs,  odd  sizes  and  shapes 
that  are  used  in  this  market,  lucky  colors  and  the  large  number  of  small 
details  that  enter  into  the  manufacture  and  sale  of  goods  if  they  are  to  be 
popular  in  Japan. 


Chambers  of  Commerce 

It  is  quite  surprising  that  there  is  no  American  Chamber  of  Commerce 
in  Japan.  All  the  great  commercial  nations  have  for  some  time  been  busy 
establishing  their  chambers  of  commerce  in  all  parts  of  the  world,  and  the 
United  States  should  keep  up  with  the  procession.  The  Japanese  have  estab- 
lished a system  of  Japanese  chambers  of  commerce  in  the  principal  cities  of 
China  and  these  chambers  occasionally  join  together  for  general  meetings,  and 
keep  in  close  touch  with  the  chambers  of  commerce  in  Japan. 

18 


Get  In  at  the  Bottom 


The  United  States  has  suddenly  become  the  strongest  industrial  nation, 
and  our  present  capacity  for  production  will  make  it  necessary  for  us  to  more 
seriously  develop  our  foreign  trade.  If  the  Washington  Conference  attains 
the  results  that  are  hoped  for,  American  trade  with  Japan  will  be  given  a 
great  impetus  and  there  will  perhaps  be  no  better  time  to  begin  to  broaden 
our  activities  in  the  Japanese  market  than  the  present  when  prices  are  near 
the  bottom  and  business  is  poor,  for  under  such  conditions  a slow,  sure  be- 
ginning can  be  made  and  the  danger  of  losses  from  price  fluctuations  will 
be  largely  eliminated. 


19 


CHAPTER  VII 


American  Capital  in  Japan 


Nowadays,  American  capital  is  beginning  to  take  an  interest  in  the  de- 
velopment of  foreign  countries,  and  there  would  seem  to  be  two  fields  of 
operations  in  the  Land  of  the  Rising  Sun,  one  in  Japan  proper  and  the 
other  in  connection  with  the  Japanese  projects  on  the  mainland  of  Asia. 

Development  in  Japan 

A short  inspection  of  Japanese  cities  and  towns  is  all  that  is  necessary  to 
convince  an  American  that  practically  all  of  the  conditions  of  living  must 
be  improved  if  Japan  is  to  become  a really  civilized  country.  The  progress 
of  the  last  fifty  years  has  been  very  great,  and  all  indications  point  toward  a 
gradual  improvement  in  the  living  conditions  of  the  masses  of  the  people 
until  they  may  some  day  in  the  future  somewhat  approach  living  conditions 
in  Europe  and  America.  It  would  therefore  appear  certain  that  during  the 
next  twenty  or  thirty  years  enormous  contracts  will  be  let  for  the  construc- 
tion of  sewers,  water  mains,  gas  and  electric  plants,  the  paving  of  streets,  the 
building  of  roads,  and  the  rebuilding  of  nearly  all  of  the  houses  in  the  country. 

Of  course,  in  the  past  people  have  lived  very  fairly  comfortably  and  have 
not  really  needed  many  of  the  public  improvements  that  usually  go  with 
civilization,  but  wealth  and  prosperity  are  increasing  in  Japan  and  the  time 
would  seem  to  be  about  here  when  the  modern  comforts  of  other  civilized 
countries  are  going  to  be  gradually  extended  from  the  small  prosperous  upper 
class  to  the  masses  of  the  people,  but  it  must  be  realized  that  this  process 
will  be  a slow  one,  for  the  Japanese  people  do  not  like  booms  or  boomers 
and  prefer  to  make  changes  slowly  and  conservatively. 

Already  throughout  Japan  considerable  development  has  taken  place 
in  connection  with  business  and  industry,  but  it  is  very  apparent  that  during 
the  coming  years  many  hotels,  office  buildings  and  public  institutions  must  be 
built  and  many  new  factories  and  industrial  plants  must  be  constructed. 
Furthermore,  railroads  must  be  considerably  extended  and  additional  docks 
and  harbor  facilities  must  be  provided. 

With  all  of  this  construction  in  contemplation,  it  is  interesting  to  note  that 
the  Japanese  are  not  as  yet  considered  good  builders  when  large  modem  con- 
struction is  to  be  executed  and  consequently  there  would  seem  to  be  good 
opportunities  for  strong  and  able  American  architects  and  contractors. 

In  many  countries  in  need  of  development,  the  capitalist,  the  contractor 
and  the  practical  operator  have  worked  hand  in  hand.  If  an  electric  light  plant 

20 


was  needed,  the  capitalist  has  handled  a bond  issue,  secured  by  a mortgage 
against  the  electric  light  plant  and  usually  guaranteed  by  the  municipality,  the 
province,  or  the  nation.  The  contractor  has  then  built  the  plant,  whereupon 
the  practical  operator  has  taken  charge  and  has  operated  the  plant  for  a 
considerable  term  of  years  under  an  operating  concession.  The  financing, 
the  construction  contract  and  the  operating  concession  were  usually  all 
parts  of  one  transaction  and  were  all  provided  for  in  one  document. 

The  Japanese  are  very  much  averse  to  entering  into  contracts  with 
foreigners  covering  financing,  construction  and  operation  under  concession. 
They  are  somewhat  fearful  of  the  foreign  capitalist  and  they  prefer  to  operate 
their  utility  and  industrial  plants  themselves.  However,  they  are  not  averse 
to  the  employment  of  foreign  contractors,  and  consequently  greater  opportuni- 
ties would  seem  to  be  available  for  the  contractor  than  for  the  capitalist  and 
the  operator.  Nevertheless,  Japan  will  need  a large  amount  of  foreign  capital 
unless  her  development  work  is  to  be  allowed  to  drag  along  over  a great  many 
years,  and  American  business  men  may  eventually  find  it  advantageous  to  organ- 
ize Japanese  corporations  for  the  purpose  of  financing,  constructing  and  opera- 
ting utilities  and  industries  in  Japan,  but  such  corporations  will,  of  course,  be 
organized  under  Japanese  laws  and  will  have  none  of  the  earmarks  of  foreign 
exploitation. 

Development  on  the  Mainland 

It  would  seem  that  Japan  could  advantageously  use  large  amounts  of 
foreign  capital  in  developing  her  projects  on  the  mainland. 

The  military  party  in  Japan  apparently  believes  that  the  next  period  of 
Japanese  history  should  bring  about  the  development  of  sources  of  raw 
materials  and  should  result  in  a tremendous  increase  of  the  economic  strength 
of  the  country.  The  militarists  realize  that  economic  strength  is  necessary  to 
back  up  the  army  and  navy  and  make  Japan  a supremely  great  nation.  The 
militarists  never  seem  to  consider  the  possibilities  of  developing  tbs  economic 
strength  of  Japan  and  making  her  a supremely  great  nation  without  the  army 
and  navy.  It  is  said  that  this  is  due  to  the  fact  that  they  feel  that  the  Japan- 
ese are  poor  business  men  and  will  not  be  able  to  meet  foreign  competition 
in  Asia  without  special  advantages.  Military  control- insures  these  advantages 
and  consequently  they  not  only  think  that  the  development  of  economic  strength 
is  necessary  to  back  up  the  army  and  navy,  but  they  believe  that  without 
the  army  and  navy  economic  strength  cannot  be  created.  They  feel  that 
the  two  go  hand  in  hand  and  the  field  of  operations  is,  of  course,  the  main- 
land of  Asia. 

The  Japanese  want  no  interference  with  their  plans  on  the  mainland  and 
consequently  they  want  no  partners.  While  they  could  use  foreign  capital 
to  advantage  and  a partnership  between  American  capital  and  Japanese  ex- 
perience would  be  advantageous  from  an  economic  standpoint,  nevertheless, 
it  would  not  be  desirable  from  a military  standpoint  and  consequently  Japan 
prefers  to  go  it  alone. 

The  advantages  of  military  control  may  be  illustrated  by  the  conditions 
in  Manchuria.  The  open  door  is  supposed  to  be  still  open  in  Manchuria,  but 
the  Japanese  have  been  getting  all  the  trade  and  other  nations  have  recently 
had  a hard  time  to  sell  any  goods.  The  railroads  are  owned  by  Japan 
and  the  Japanese  business  men  are  able  to  secure  prompt  freight  deliveries  while 
the  foreigners  often  wait.  It  is  also  surmised  that  railroad  rebates  some- 


21 


times  go  to  Japanese  firms  who  are  competing  with  firms  of  other  nationalities. 
I'he  telegraph  lines  are  owned  by  the  Japanese  as  well  as  the  post  offices, 
and  it  is  claimed  that  Japanese  firms  receive  undue  advantages  in  connection 
with  the  prompt  delivery  of  mail  and  telegrams.  The  banks  are  largely  branches 
of  Japanese  financial  institutions,  and  American  business  men  sometimes 
charge  that  the  banks  have  a habit  of  manipulating  the  exchange  market  to  the 
disadvantage  of  business  men  not  of  Japanese  nationality.  The  collection 
of  import  duties  is  subject  to  the  influence  of  the  Japanese  and  it  is  claimed 
that  there  are  cases  on  record  where  Japanese  traders  were  able  to  avoid  the 
payment  of  any  duties  on  the  goods  that  they  sent  into  the  country.  In  fact, 
it  may  be  said  that  the  general  influence  of  political  control,  backed  up  by 
armed  garrisons,  is  too  great  a handicap  for  foreign  business  men  to  overcome 
and  results  in  Japanese  supremacy  in  the  developing  of  raw  materials  and 
the  carrying  on  of  trade. 

This  policy  of  the  Japanese  might  lead  to  ultimate  prosperity  if  it  did  not 
come  into  conflict  with  the  interests  of  other  nations.  Militarism  in  Germany 
might  have  been  all  right  for  Germany  if  it  had  not  come  into  collision  with  the 
rest  of  the  world.  There  are  certain  principles  of  justice  and  fair  dealing 
that  it  does  not  profit  individuals  or  nations  to  disregard,  and  history  would 
seem  to  warn  Japan  of  the  dangers  of  some  of  her  present  policies.  She 
would  indeed  be  wise  if  she  were  to  give  up  militarism  and  monopoly  and  sub- 
stitute friendliness  and  international  co-operation. 


CHAPTER  VIII 


The  Government  of  China 


WHEN  the  Emperor  Kuang  Hsu  and  the  old  Empress  Dowager  Tzu  Hsi 
both  died  in  1908,  a little  boy,  Hsuan  Tung,  succeeded  to  the  throne 
and  Prince  Ch’un  was  appointed  Regent  to  act  until  the  Emperor  be- 
came of  age.  The  ruling  family  had  become  very  corrupt  and  very  weak  and  a 
change  in  the  dynasty  had  long  been  urged  by  many  influential  people.  The  new 
Prince  Regent  was  not  as  strong  a character  as  the  old  Empress  Dowager  and  the 
agitation  for  some  change  in  the  government  became  continually  stronger  and 
many  of  the  provinces  began  to  demand  provincial  autonomy.  In  1911  some 
local  trouble  broke  out  at  Wuchang  and  the  weakness  of  the  central  govern- 
ment in  putting  down  this  disturbance  led  to  a considerable  spread  of  the 
disaffection  and  finally  several  provinces  declared  their  independence  and  a 
great  part  of  the  southern  and  western  sections  of  the  country  became  in- 
volved. The  Prince  Regent  called  to  his  assistance  Yuan  Shih  k’ai  who  was 
looked  upon  as  the  strongest  man  in  China.  Yuan  was  made  Prime  Minister 
and  a liberal  constitutional  monarchy  was  proposed.  However  the  Cantonese 
and  other  southerners  realized  that  things  were  all  going  their  way  and  con- 
sequently insisted  upon  the  establishment  of  a republic.  The  government 
in  the  north  suggested  that  the  form  of  government  be  put  to  a vote  of  the 
people  but  while  negotiations  were  being  carried  on  a provisional  govern- 
ment was  established  at  Nanking  and  Dr.  Sun  Yat  Sen  was  elected  provisional 
President.  In  February  1912  the  Manchu  dynasty  abdicated  and  suggested 
that  the  government  should  be  a republic  henceforth  and  that  Yuan  Shih 
k’ai  should  act  as  provisional  President.  The  assembly  at  Nanking  agreed 
to  the  suggestions  of  the  Manchu  dynasty  and  also  bound  the  new  govern- 
ment to  supply  adequate  funds  for  the  future  financial  support  of  the  ruling 
family.  Dr.  Sun  Yat  Sen  then  resigned  as  provisional  President  and  Yuan 
Shih  k’ai  was  elected  in  his  place. 

Meeting  of  Parliament 

In  1912  the  National  Assembly  which  had  moved  from  Nanking  to  Peking 
adopted  fundamental  laws  and  in  1913  the  first  Parliament  assembled.  The 
right  to  vote  was  restricted  by  educational  and  property  qualifications  but 
nevertheless  the  plan  for  the  election  of  Parliament  was  along  democratic 
lines.  Yuan  Shih  k’ai  felt  himself  to  be  the  strong  man  of  China  and  before 
very  long  he  got  into  a fight  with  Parliament,  the  result  being  that  a revolt 
was  started  against  him  in  the  south  of  China  which  he  finally  put  down  by 
force  of  arms.  Parliament  finally  passed  a law  providing  that  the  President 


23 


of  the  Republic  should  henceforth  be  elected  by  the  two  houses  of  Parlia- 
ment and  in  1913  provisional  President  Yuan  was  elected,  not  without  great 
opposition,  the  first  regular  President  of  the  Republic. 

Restoration  of  Monarchy 

Between  1913  and  1915  President  Yuan  ran  things  with  a high  hand. 
He  forced  his  opponents  out  of  Parliament  and  bad  the  fundamental  laws 
changed  to  suit  himself.  He  finally  had  the  provinces  appoint  hand  picked 
electors  to  vote  upon  a change  back  to  a monarchy  and  these  electors  prac- 
tically all  voted  for  a monarchy  and  also  voted  for  Yuan  Shih  k’ai  as  Emperor. 
The  Monarchy  was  proclaimed  at  the  end  of  1915  but  a serious  revolt  im- 
mediately sprang  up  in  the  south  and  it  is  said  that  the  Japanese 
who  had  always  disliked  Yuan  assisted  in  stirring  up  trouble  for  him  all 
over  China.  Yuan  decided  that  the  jig  was  up  and  renounced  the  title  of 
Emperor.  He  appointed  an  influential  man,  Tuan  Chi-jui,  Prime  Minister 
and  promised  a reversion  to  constitutional  government.  However  the  south 
organized  a provisional  government  at  Canton  and  came  out  strongly  for 
the  elimination  of  Yuan  from  public  life.  At  this  stage  of  the  game  Yuan 
died  and  the  Vice  President,  Li  Yuan-hung  became  the  President  while  Tuan 
Chi-jui  remained  as  Prime  Minister  and  soon  became  the  strong  man  of  the 
administration.  Parliament  reconvened  in  August  1916  and  it  looked  as 
though  the  Republic  might  have  smoother  sailing,  but  before  very  long  the 
Prime  Minister  got  into  a disagreement  with  Parliament  and  the  President 
dismissed  him.  This  led  to  a revolt  in  the  north  by  the  followers  of  Prime 
Minister  Tuan  and  an  attempt  was  made  to  set  up  a new  government  at 
Tientsin. 

Second  Restoration  of  Monarchy 

The  President  was  in  great  need  of  help  and  he  called  to  his  assistance 
General  Chang  Hsun  who  had  considerable  military  prestige.  General  Chang 
agreed  to  put  down  the  revolt  in  the  north  but  demanded  that  the  President 
dissolve  Parliament  and  the  President  was  forced  to  take  this  action  even 
though  he  himself  believed  that  he  did  not  have  the  legal  power  to  do  it. 
A part  of  the  Parliament  withdrew  to  Canton  and  established  the  Southern 
government  that  has  been  opposing  the  Northern  government  ever  since.  In 
the  meantime  General  Chang  pronrptly  went  back  on  the  President  and  de- 
clared the  Manchu  boy  Emperor  to  be  again  the  ruler  of  China  with  the 
idea  of  he,  himself,  acting  as  Regent.  The  President  now  turned  to  the 
northern  revolters  and  reappointed  Tuan  Chi-jui  as  Prime  Minister.  Tuan 
led  an  army  to  Peking  and  in  five  days  the  imperialists  surrendered  and  the 
boy  Emperor  was  sent  back  home  again.  Li  Yuan-hung  then  resigned  as 
President  and  the  vice  President  Feng  Kuo-chang  became  the  President. 
Tuan  remained  as  Prime  Minister  and  with  Japanese  influence  continued  to  be 
the  strong  man  of  the  administration  notwithstanding  the  fact  that  he  dis- 
agreed radically  with  the  President.  The  south  of  China  refused  to  come 
back  into  the  fold  as  they  claimed  that  the  northern  government  was  im- 
perialistic and  controlled  by  Japan. 

New  Parliament  Summoned 

Feng  Kuo-chang  did  not  last  long  as  President  for  a Parliament  was 
summoned  under  a new  law  that  had  been  promulgated  and  the  present 
President,  Hsu  Shih-chang,  was  elected.  This  was  in  October  1918  and  the 
new  President  arranged  for  Tuan  to  remain  as  Prime  Minister.  The  govern- 
ment of  the  south  refused  to  recognize  the  new  Parliament  or  the  new  Presi- 


24 


dent  and  pointed  out  the  fact  that  the  Prime  Minister  and  the  new  Presi- 
dent were  controlled  by  the  powerful  military  governors  of  three  of  the 
northern  provinces  and  claimed  that  these  military  governors  with  Japan- 
ese co-operation  were  the  real  powers  behind  the  Peking  government. 

Every  dog  has  his  day  and  after  a while  the  northern  military  governors 
gave  their  support  to  General  Wu  Pei-fu  who  by  force  of  arms  ousted  Prime 
Minister  Tuan.  General  Wu  then  suggested  that  a National  Convention  be 
called  together  in  order  that  the  difficulties  of  China  might  be  ironed  out, 
but  this  did  not  strike  the  fancy  of  the  northern  military  governors  and 
General  Wu  was  hastily  relegated  to  the  background  while  Chin  Yun-keng, 
a protege  of  the  military  governors,  was  made  Prime  Minister  and  still  holds 
that  position  although  he  has  recently  been  threatening  to  resign  because  of 
disagreements  with  the  President.  At  the  present  time  everything  is  being 
done  by  Presidential  mandate  upon  recommendation  of  the  Cabinet,  both  the 
President  and  the  Cabinet  holding  their  positions  subject  to  the  pleasure  of  the 
northern  military  governors. 

Present  Confusing  Situation 

At  the  present  time  the  north  and  the  south  are  supposed  to  be  carrying 
on  a war  against  each  other  but  this  war  seems  to  have  degenerated  into 
a free-for-all  fight  between  the  ambitious  military  governors  of  various  prov- 
inces. Recently  General  Wu  Pei-fu  of  the  north  has  been  “coming  back,” 
for  he  has  been  winning  battles  against  the  south  and  has  revived  his  Na- 
tional Convention  idea.  He  is  opposed  by  strong  men  in  the  north  and  bis 
continued  success  will  doubtless  lead  to  important  changes  in  the  political 
line-up  in  that  part  of  the  country. 

In  the  south  all  is  not  harmony  for  Dr.  Sun  Yat  Sen  is  having  trouble 
with  General  Chen  Chiung-ming  who  seems  to  wish  to  supercede  Dr.  Sun  as 
the  big  man  of  the  south  and  the  southwestern  and  western  provinces  have 
recently  been  talking  about  the  establishment  of  a third  government  with  head- 
quarters at  Wuchang. 

Then  it  must  not  be  forgotten  that  the  Manchu  boy  Emperor  is  now  almost 
of  age,  that  a descendant  of  the  old  Ming  dynasty  stands  ready  to  accept  the 
throne  upon  any  slight  indication  of  an  invitation,  that  wonderful  possibilities 
exist  for  the  military  governor  who  is  powerful  enough  to  develop  into  a Dicta- 
tor and  become  the  next  Strong  Man  of  China  and  that  in  the  meantime  the 
menace  of  Japan  hangs  over  the  whole  situation. 

Such  is  the  republican  form  of  government  in  Far  Cathay! 

Reasons  for  Failure  of  Republic 

The  failure  of  the  Republic  to  bring  about  the  beneficial  changes  that 
were  hoped  for  is  due  largely  to  the  fact  that  the  Chinese  masses  are  entirely 
illiterate  and  pay  not  the  slightest  attention  to  politics.  They  are  inter- 
ested only  in  their  own  local  affairs  and  care  not  who  rules  the  country  so  long  as 
the  tax  collector.  Another  reason  for  failure  is  the  fact  that  every  Chinese 
official  feels  that  public  office  is  merely  an  opportunity  to  get  rich.  Ignorance 
and  disinterestedness  at  the  bottom  and  dishonesty  at  the  top  have  so  far  made 
it  impossible  for  a republican  form  of  government  to  succeed. 

While  it  would  appear  that  the  coming  of  a dictator  and  the  creation  of  a 
constitutional  monarchy  would  seem  to  be  natural  things  to  expect,  never- 
theless it  must  be  remembered  that  large  numbers  of  western  educated  students 
are  returning  to  China  every  year,  that  the  excellent  mission  schools  and  univer- 


25 


sities  are  turning  out  large  numbers  of  intelligent  future  leaders,  that  newspapers 
are  carrying  new  ideas  to  those  who  can  read  and  that  the  extension  of  railroads 
is  gradually  bringing  new  thoughts  and  suggestions  to  practically  all  of  the  peo- 
ple of  the  country.  Some  well  informed  people  feel  that  if  Japan  and  other  na- 
tions will  give  China  a chance,  the  growing  intelligence  of  the  Chinese  people 
and  the  popularity  of  the  idea  of  provincial  autonomy  may  eventually  result  in 
the  establishment  of  strong  provincial  governments  whose  powers  will  extend  ex- 
clusively to  domestic  matters,  all  of  these  provincial  governments  being  held  to- 
gether by  one  central  government  whose  powers  will  extend  exclusively  to  those 
matters  of  national  and  international  concern. 

Perhaps  it  can  hardly  be  expected  that  any  form  of  government  will  be  per- 
manently stable  in  China  so  long  as  the  country  must  face  the  problem  of  over- 
population. All  Chinese  history  is  filled  with  stories  of  revolts,  rebellions, 
brigandage  alnd  loot  and  a large  part  of  this  disorder  has  been  due  to  over- 
population. The  Chinese  have  always  been  willing  to  fight  and  steal  rather 
than  starve  and  as  the  population  always  increases  faster  than  the  food  supply 
there  is  always  a large  section  of  the  people  on  the  brink  of  starvation  and  these 
are  always  willing  to  join  whatever  military  or  bandit  leader  may  come  along. 
Over-population  must  continue  in  China  regardless  of  any  new  developments 
so  long  as  the  Chinese  people  continue  to  look  with  favor  upon  the  marriage  of 
minors,  the  practice  of  polygamy  and  the  Confucian  teaching  that  every  man 
owes  a duty  to  himself  and  to  his  forebears  to  leave  behind  him  in  this  world 
a numerous  company  of  ancestor  worshipers. 

The  domestic  troubles  of  China  do  not  make  impossible  the  extension  of 
trade  with  this  great  country  for  the  so-called  treaty  ports  are  usually  undis- 
turbed by  the  goings  and  comings  of  the  warriors  and  the  political  chieftains,  but 
under  such  chaotic  conditions  the  progress  and  prosperity  of  the  nation  cannot 
make  any  great  forward  strides  and  the  real  development  of  China  must  await 
the  day  when  honest  and  stable  government  shall  be  established. 


26 


CHAPTER  IX 


The  Hopes  of  “Young  China’’ 


CHINA”  has  been  represented  by  most  foreign  writers  as  en- 
jf  thusiastic  and  progressive  in  the  making  of  plans  but  slow  and  decided- 
ly impractical  in  carrying  them  out.  However,  most  of  the  representa- 
tives of  Young  China  impress  the  average  American  as  high  grade,  intelligent 
and  alert  young  men.  Many  of  them  are  engaged  in  banking,  manufacturing, 
engineering  and  general  business  and  their  conversation  and  manners  are 
exactly  the  same  as  the  conversation  and  manners  of  a group  of  high  class, 
well  educated  young  American  business  men.  If  in  some  things  they  may 
occasionally  give  indications  of  being  impractical  it  must  be  remembered  that 
they  are  yet  young  men  and  have  not  gained  the  experience  of  age,  that  a 
classical  education  in  an  American  university  sometimes  leaves  even  Americai 
young  men  with  impractical  ideas,  and  that  they  must  live  down  the  natural 
tendency  of  the  Chinese  race  to  make  plans  and  then  put  their  execution  off 
and  let  the  future  take  care  of  itself. 

It  may  be  of  interest  to  outline  some  of  the  matters  now  being  dis- 
cussed by  these  young  Chinese  business  men  as  their  ideas  represent  the  am- 
bitions of  a new  and  powerful  force  in  China. 

Foreign  Settlements  and  Spheres 
of  Influence 

Young  China  would  like  to  see  “foreign  settlements”  in  China  abolished 
as  they  were  in  Japan  and  hopes  that  in  the  future  the  spheres  ‘of  influence 
marked  out  by  foreign  nations  will  be  abandoned. 

The  foreign  settlements  represent  sections  of  Chinese  territory  under  the 
control  and  government  of  various  foreign  nations,  they  having  been  created 
in  order  that  foreigners  might  have  protection  and  safety  in  transacting 
business  in  China.  These  settlements  are  usually  administered  by  a council 
elected  by  the  tax  payers  but  the  Chinese  tax  payers  within  the  settlement  are 
allowed  no  representation  even  though  they  are  usually  much  more  numerous 
than  the  foreign  tax  payers.  Young  China  urges  that  the  Chinese  tax  payers 
be  taught  the  principles  of  good  local  government  by  being  given  representa- 
tion on  the  local  council  with  the  provision  that  a majority  of  the  council 
shall  always  be  made  up  of  foreigners.  It  is  hoped  that  the  Chinese  may 
gradually  learn  proper  methods  of  administration  and  that  the  time  will 
finally  arrive  when  the  settlements  can  be  abandoned  and  foreigners  will 
feel  safe  to  live  in  China  without  this  form  of  protection. 


27 


Spheres  of  influence  were  marked  out  in  China  by  various  powers  in  ac- 
cordance with  the  theory  of  the  balance  of  power.  If  China  was  to  be  parti- 
tioned, each  nation  wanted  a good  piece  of  the  pie  in  order  that  the  balance 
of  power  among  the  nations  might  be  maintained.  As  a result  of  the  world 
war  the  balance  of  power  idea  is  a thing  of  the  past  and  the  danger  of  a 
partition  of  China  among  the  nations  of  Europe  would  seem  to  have  disap- 
peared, Young  China  hopes  that  all  spheres  of  interest  may  ultimately  be 
given  up  by  European  nations  and  that  Japan  may  be  persuaded  to  join  with 
them  in  the  real  maintenance  of  the  Open  Door  in  China. 

Extraterritoriality 

Each  of  the  important  foreign  nations,  including  the  United  States,  main- 
tains its  own  courts  in  China  and  its  citizens  are  subject  to  their  own  laws 
and  must  take  all  legal  matters  before  their  own  courts.  This  system  is 
known  as  extraterritoriality  and  it  is  maintained  because  of  the  lack  of  modern 
judicial  standards  in  China.  Young  China  hopes  that  this  system  will  be 
done  away  with  in  time  as  it  was  done  away  with  in  Japan  and  it  is  hoped 
that  Chinese  knowledge  of  modern  legal  practices  will  rapidly  grow,  that  a 
new  judicial  system  may  in  the  near  future  be  put  into  practical  effect  and 
that  trial  by  jury  may  ultimately  be  established.  (It  is  interesting  to  note  that 
trial  by  jury  is  unknown  in  the  Far  East.)  Young  China  urges  that  the  for- 
eign courts  help  to  educate  the  people  by  appointing  Chinese  as  assistant  Judges 
and  court  officers  and  it  is  suggested  that  the  United  States  could  add  to  its 
great  number  of  friends  in  China  if,  at  some  opportune  time,  it  should  enter 
into  a treaty  with  China  providing  for  the  giving  up  of  extraterritoriality  upon 
the  maintenance  by  China  for  a stated  number  of  years  of  such  judicial  stan- 
dards as  may  be  set  forth  in  the  treaty. 

Tariff 

Many  years  ago  China  agreed  with  Great  Britain  that  she  would  not 
levy  tariff  duties  at  a higher  rate  than  five  per  cent.  Since  this  agreement 
was  made  China  has  signed  treaties  with  many  nations  containing  the  “most 
favored  nation”  clause  and  she  is  now  unable  to  modify  her  tariff  agreement 
with  Great  Britain  unless  all  of  these  other  countries  acquiesce  and  this  some 
of  them  have  refused  to  do.  As  a result  of  this  situation  China  is  unable  to 
change  her  tariff  schedules  in  accordance  with  the  needs  of  the  country  and 
her  tariff  revenues  are  greatly  restricted.  Young  China  hopes  and  prays  that 
the  important  nations  will  not  continue  to  take  advantage  of  a hard  bargain 
and  that  an  agreement  may  be  arrived  at  in  the  near  future  under  wEich  China 
will  be  allowed  to  exercise  some  control  over  her  own  tariff  schedules.  The 
collection  of  the  present  duties  is  in  the  hands  of  foreigners  as  the  duties  are 
pledged  as  security  for  Chinese  government  loans  placed  in  foreign  countries 
and  it  is  urged  by  the  educated  young  men  of  China  that  an  increasing  num- 
ber of  Chinese  officials  be  instructed  as  to  the  proper  methods  of  administering 
the  customs  by  being  given  employment  under  the  present  foreign  officials 
who  have  charge  of  the  customs  organization. 

Foreign  Control  of  Financing 

For  a good  many  years  China  has  been  borrowing  money  in  foreign  coun- 
tries and  originally  there  was  great  competition  among  foreign  nations  who 
wished  to  look  after  her  monetary  needs.  As  a result  of  this  competition 
China  was  able  to  get  very  good  terms  and  was  able  to  play  the  political 
schemes  of  one  country  off  against  those  of  another.  However,  some  years 


28 


ago  Great  Britain,  France,  Germany  and  the  United  States  entered  into  an 
arrangement  by  which  their  bankers  acted  together  in  loan  negotiations  with 
China.  This  was  known  as  the  “four  power  group”  and  later  on  this  was 
extended  to  the  “six  power  group”  by  the  admission  of  Russia  and  Japan. 
This  arrangement  was  of  course  terminated  by  the  war  and  'there  has  now  been 
organized  a new  “Consortium”  made  up  of  bankers  representing  Great  Britain, 
France,  Japan  and  the  United  States.  It  has  been  suggested  that  a group  of 
Chinese  banks  might  be  invited  to  join  the  Consortium  but  the  indications  are 
that  the  Chinese  banks  would  decline  such  an  invitation  believing  that  it  is  to 
the  interest  of  their  country  for  them  to  remain  independent  of  any  international 
group. 

Young  China  objects  to  the  fact  that  loans  made  by  these  groups  for  the 
construction  of  railroads  and  other  purposes  have  not  been  looked  upon  as 
strictly  business  transactions  but  have  been  considered  as  political  in  their 
nature  and  have  carried  with  them  grants  of  power  by  the  Chinese  govern- 
ment that  may  very  possibly  interfere  with  Chinese  sovereignty  in  the  future. 
The  educated  young  men  of  China  hope  that  political  finance  has  come  to  an 
end  and  that  future  financing  in  China  will  be  based  entirely  upon  business  con- 
siderations and  will  have  as  its  sole  object  the  development  and  building  up  of 
the  Republic. 

Foreign  Postoffices 

All  of  the  important  nations,  including  the  United  States,  operate  their 
own  postoffices  and  maintain  their  own  system  of  mail  collection  boxes  in  the 
important  treaty  ports  of  China,  and  Japan  goes  them  one  better  by  main- 
taining her  postoffices  in  many  parts  of  the  country.  Young  China  looks  upon 
this  as  a.  great  indignity  and  furthermore  feels  that  it  is  depriving  China  of  a 
large  postal  revenue  that  naturally  belongs  to  her.  Furthermore  it  is  claimed 
that  the  huge  morphine  and  opium  trade  that  has  recently  been  developed  by 
Japan  in  China  is  being  carried  on  through  the  Japanese  mails,  the  drugs  being 
sent  through  the  Japanese  postoffices  to  Japanese  residents  in  China  who 
illegally  sell  them  to  the  Chinese.  It  is  claimed  that  when  the  Chinese  officials 
succeed  in  apprehending  the  Japanese  drug  distributors  the  extraterritorial 
system  makes  it  possible  for  the  Japanese  to  be  promptly  cleared  by  taking 
their  cases  before  their  ovm  Japanese  court.  Young  China  realizes  that  the 
Chinese  postal  service  is  not  the  most  reliable  in  the  world  but  nevertheless 
it  is  hoped  that  some  agreement  may  be  entered  into  in  the  near  future  that 
will  change  present  unfair  and  unsatisfactory  conditions. 

The  Aggressions  of  Japan 

Young  China  believes  that  the  Japanese  intend  to  get  the  administra- 
tion of  the  affairs  of  the  country  into  their  own  hands. 

Japan  has  annexed  Korea  and  is  in  control  of  Manchuria  and  eastern 
inner  Mongolia.  She  is  in  at  least  temporary  complete  control  of  Shantung 
province  and  she  has  been  gradually  getting  control  of  the  affairs  of  Fukien 
province.  Furthermore  the  intention  of  Japan  to  greatly  extend  her  political 
control  of  China  was  clearly  shown  by  the  famous  “twenty-one  demands”  that 
were  made  by  her  during  the  war. 

Japan  has  been  carrying  on  war-like  penetration  of  China  and  at  the 
same  time  she  has  not  neglected  so-called  “peaceful  penetration.”  She  has 
loaned  huge  sums  of  money  to  China  and  through  these  loans  she  has  man- 
aged to  get  control  of  the  operation  of  some  of  the  railroads,  has  acquired  the 
virtual  ownership  of  the  great  iron  and  steel  industry  located  in  the  neighbor- 

29 


hood  of  Hankow,  and  has  secured  a strong  hold  on  the  Chinese  government 
banks.  Furthermore  she  has  been  granted  the  privilege  of  exploiting  the  great 
forests  in  the  north  and  of  developing  the  mines  in  various  parts  of  the  country 
and  she  is  also  operating  many  public  utilities  and  industrial  enterprises.  In  con- 
nection with  the  control  and  management  of  business  and  industrial  undertakings 
Japan  usually  claims  the  right  to  send  in  troops  to  protect  Japanese  business 
interests  whenever  she  feels  that  these  interests  are  threatened  because  of  local 
disorders. 

Young  China  is  much  exercised  over  the  fact  that  Japanese  garrisons 
have  been  established  in  various  parts  of  the  Republic,  Japanese  police  stations 
have  been  illegally  placed  upon  Chinese  soil,  Japanese  telegraph  lines  have 
been  constructed  and  telegraph  offices  opened  in  numerous  places,  Japanese 
postoffices  have  been  scattered  over  the  country  and  Japanese  peddlers  and 
small  tradesmen,  who  often  act  as  secret  service  agents,  have,  contrary  to 
law,  been  very  active  in  many  of  the  provinces. 

It  is  of  course  a well  known  fact  that  Japanese  influence  at  Peking  has 
been  predominant  during  the  past  few  years  and  it  is  also  claimed  that  Japan- 
ese agents  have  been  very  active  in  keeping  the  country  divided  and  that  they 
have  used  large  sums  of  money  in  their  endeavor  to  promote  dom.estic  political 
chaos.  To  the  young  men  of  China  who  are  familiar  with  the  history  of  Korea 
the  Japanese  programme  appears  to  be  quite  plain  and  they  greatly  fear 
that  their  country  will  follow  Korea  under  the  rule  of  Japan. 

Young  China  is  inclined  to  blame  the  British  for  the  recent  Japanese 
aggressions  for  they  feel  that  the  existence  of  the  Anglo- Japanese  Alliance  led 
Japan  to  feel  that  she  could  go  ahead  with  her  programme  in  China  without 
fear  of  outside  interference  and  without  any  danger  of  antagonizing  Great 
Britain.  It  is  said  that  under  present  conditions  the  renewal  of  the  Alliance 
would  precipitate  a great  trade  boycott  against  the  British  as  well  as  the 
Japanese 

Young  China  looks  to  the  Washington  Conference  to  work  out  some 
agreement  that  will  save  China  from  Japan.  The  idea  of  any  kind  of  an  in- 
ternational protectorate  is  very  unpopular  for  Young  China  does  not  believe 
that  such  an  arrangement  would  work  out  to  the  advantage  of  their  country  and 
it  is  felt  that  the  jealousies  between  the  nations  that  might  undertake  to 
establish  such  a protectorate  would  surely  result  in  trouble  for  the  Celestial 
Republic.  The  Japanese  have  been  doing  a great  deal  of  talking  about  a 
Monroe  Doctrine  for  Asia  and  Young  China  seems  to  think  that  it  would  be  a 
good  plan  for  the  Washington  Conference  to  actually  establish  a real  Monroe 
Doctrine  covering  China.  Under  such  an  arrangement  the  principal  nations 
would  serve  notice  that  no  territorial  encroachment  by  any  nation  would  be 
permitted  in  China  and  that  the  Open  Door  would  be  kept  open  just  the 
same  as  it  is  kept  open  in  South  America  under  the  American  Monroe  Doctrine. 
Young  China  believes  that  China  can  establish  modern  stable  government  in  a 
much  shorter  time  than  was  required  by  the  leading  South  American  nations 
provided  only  that  she  is  accorded  the  same  opportunities  that  were  accorded 
to  South  America.  Here  would  seem  to  be  a programme  in  full  accord  with 
American  policies  and  traditions  and  in  harmony  with  policies  that  the  Japan- 
ese have  at  least  claimed  to  espouse. 

An  American  News  Service 

Young  China  calls  attention  to  the  total  lack  of  an  American  news  service 
in  China.  The  Associated  Press  does  not  operate  in  China  and  the  news 


30 


is  supplied  by  Reuters,  owned  by  the  British,  and  Kokusai,  owned  by  the 
Japanese  and  closely  connected  with  Reuters.  Very  little  American  news  filters 
through  except  that  the  leading  murders,  riots,  explosions  and  divorces  seem 
to  be  fairly  adequately  reported.  This  situation  is  very  disadvantageous  to 
American  business  interests  and  to  American  political  standing.  It  is  said  that 
the  news  of  the  Lansing-Ishii  note  was  released  by  the  Japanese  news  service  in 
Peking  even  before  it  was  released  in  America  and  the  Japanese  explanation 
of  this  note  was  thoroughly  spread  all  over  China.  There  was  no  news  service 
to  carry  our  interpretation  and  consequently  much  unfriendliness  was  developed 
toward  America  and  the  damage  that  was  done  has  not  yet  been  fully  re- 
paired, It  would  seem  to  be  very  greatly  to  the  interest  of  the  business  men 
of  America  to  have  an  American  news  service  cover  China  during  the  Wash- 
ington Conference  for  only  by  interpreting  the  news  ourselves  will  we  be  able  to 
retain  Chinese  friendship,  particularly,  if  some  of  the  decisions  of  the  Conference 
are  contrary  to  the  desires  of  China. 

Chinese  Students  in  America 

It  is  interesting  to  learn  from  returned  Chinese  students  just  how  they 
were  treated  while  they  were  in  America  and  in  this  connection  there  would 
seem  to  exist  a great  opportunity  for  Chambers  of  Commerce  to  help  our 
future  Chinese  trade.  There  are  several  thousand  Chinese  students 
now  studying  in  American  universities  and  it  has  perhaps  never  occurred 
to  us  how  much  these  students  would  appreciate  any  attentions  that 
might  be  shown  them  by  our  business  men  and  Chambers  of  Commerce. 
Most  of  these  young  men  would  like  to  get  personally  acquainted  with  our 
business  leaders  and  would  like  to  get  some  good  practical  sound  advice  re- 
garding their  education  and  their  life  after  they  return  to  China.  It 
would  be  a fine  thing  for  our  Chambers  of  Commerce  to  occasionally  invite 
these  young  men  to  dinner,  to  appoint  special  committees  whose  duty  it  would 
be  to  occasionally  advise  with  them,  and  to  interest  our  business  men  in  taking 
some  of  these  young  Chinese  into  their  family  and  business  circles.  These 
young  men  are  to  be  the  future  leaders  of  China  as  is  plainly  seen  by  the 
influence  that  returned  students  are  now  exerting  in  the  Chinese  Bankers 
Association  and  the  Chinese  Chambers  of  Coimmerce,  these  organizations  being 
perhaps  the  most  constructive  forces  in  China  today.  American  business 
men  should  win  the  close  personal  friendship  of  these  students.  The  rela- 
tionship w;ill  be  of  great  value  to  the  students  today  and  will  pay  great 
dividends  to  us  tomorrow. 

Friendship  for  America 

The  young  men  of  China  have  confidence  in  the  future  of  their  rich 
and  boundless  country  notwithstanding  its  present  difficulties  because  they 
rely  upon  the  friendship  of  America  to  help  them  over  the  rough  places.  No 
country  in  the  world  enjoys  such  confidence  among  the  Chinese  as  our  own 
great  Republic  and  to  our  business  men  would  seem  to  fall  the  duty  of  using 
every  care  to  see  that  this  confidence  shall  never  grow  less. 


31 


CHAPTER  X 


American  Business  Opportunities 

China 


CHINA  is  a country  of  wonderful  undeveloped  resources  and  its  population 
is  made  up  of  the  hardest  working  people  in  the  world.  It  would  con- 
sequently seem  that  the  coming  of  industrialism  will  greatly  increase  the 
purchasing  power  of  the  country  and  add  tremendously  to  the  importance  of 
the  Chinese  market.  The  popularity  of  Americans  is  very  considerable  and 
their  opportunities  here  should  be  most  excellent  but  on  the  other  hand  there 
are  various  difficulties  to  be  encountered  and  only  large  and  strong  American 
concerns  should  attempt  to  come  into  this  market  at  this  particular  time. 

Business  Conditions 

During  recent  years  China  has  experienced  much  prosperity  but  just  at 
present  the  prosperity  of  the  country  has  temporarily  waned  and  a considerable 
depression  has  developed.  During  and  after  the  war  the  price  of  silver  was 
very  high  and  then  when  business  depression  spread  over  the  world  the  price 
of  silver  took  a great  fall.  As  all  business  in  China  is  transacted  on  a silver 
basis  this  fall  in  the  price  of  silver  resulted  in  enormous  losses  to  business  men. 
Furthermore  about  this  time  the  country  suffered  from  a great  drought  that 
destroyed  many  of  the  crops  and  this  drought  has  been  followed  by  great 
floods  that  have  seriously  injured  this  year’s  crops.  All  of  these  things  have 
resulted  in  cancellations  of  orders,  protested  drafts  and  failures  and  it  would 
appear  that  “honest  John  Chinaman”  has  been  learning  some  business  tricks 
from  other  nations. 

China  almost  completely  lacks  the  broad  and  complicated  business  and 
economic  organization  that  is  so  necessary  in  carrying  on  the  affairs  of  the 
people  of  modern  'nations  and  this  lack  of  organization  constantly  holds  China 
back.  However  at  just  the  present  moment  it  may  perhaps  prove  to  be  an 
advantage  because  there  has  been  no  economic  machinery  to  get  out  of  gear 
and  consequently  economic  readjustment  will  not  be  so  severe  as  in  other 
countries.  While  there  may  be  a further  weeding  out  of  weak  concerns, 
nevertheless  there  would  seem  to  be  no  need  for  a further  general  domestic 
liquidation  such  as  appears  to  be  necessary  in  Japan  and  favorable  crops  to- 
gether with  a fair  improvement  in  the  export  market  for  China’s  products 
will  doubtless  bring  back  prosperity. 


32 


Domestic  Political  Situation 

As  is  well  known  the  domestic  political  situation  is  in  a chaotic  condition 
and  while  these  domestic  troubles  do  not  seriously  affect  the  business  man  in 
the  treaty  ports  nevertheless  they  tend  to  decrease  trade  and  commerce  in  the 
interior  and  consequently  have  a detrimental  effect  upon  the  general  business 
of  the  nation. 


International  Political  Situation 

The  international  political  situation  has  a very  direct  effect  upon  business 
with  China  because  business  is  always  adversely  affected  by  such  great  uncer- 
tainties as  those  entering  into  the  so-called  Far  East  Question.  It  is  hoped 
that  the  Washington  Conference  will  make  it  possible  for  American  business 
men  to  proceed  with  confidence  in  the  stability  of  international  understand- 
ings affecting  the  Far  East. 


Exchange  Difficulties 

All  business  in  China  is  transacted  on  a silver  basis  and  the  local  cur- 
rency fluctuates  in  value  from  hour  to  hour  in  accordance  with  the  changes 
in  the  price  of  silver  as  quoted  in  London  and  New  York.  Furthermore  the 
local  demand  and  supply  affects  the  local  rates  and  there  are  various  and 
sundry  other  influences  entering  into  the  frequent  ups  and  downs.  The  entire 
monetary  system  is  quite  surprising  to  a new  comer.  In  Shanghai  he  learns 
that  his  New  York  draft  must  be  converted  into  silver  taels  but  as  there  is  no 
such  coin  in  existence  it  is  necessary  for  him  to  convert  the  taels  into  silver 
Chinese  dollars.  In  converting  his  New  York  draft  into  taels  he  finds  that 
the  rate  of  exchange  is  very  erratic  and  in  converting  his  taels  into  dollars 
he  finds  that  here  again  the  rate  of  exchange  must  be  considered.  The  new- 
comer’s respect  for  the  peculiar  type  of  financial  genius  that  has  developed  in 
China  will  continue  to  grow  when  he  draws  one  dollar  out  of  the  bank  and 
receives  ten  dimes  but  later  on  learns  that  if  he  wishes  to  deposit  one  dollar 
in  change  to  the  credit  of  his  account  it  will  be  necessary  for  him  to  produce 
eleven  dimes.  His  respect  for  the  local  system  will  be  still  more  enhanced 
when  he  changes  a dime  into  pennies  and  receives  ten  and  then  later  on  buys 
a ten  cent  cigar  and  is  told  that  it  requires  thirteen  pennies  to  make  a dime. 

It  is  absolutely  essential  for  American  business  men  who  intend  to  do 
business  in  China  to  make  a most  careful  study  of  the  influences  that  affect 
exchange,  for  business  with  China  will  develop  into  nothing  but  a gamble  on 
the  price  of  silver  unless  the  exchange  situation  is  thoroughly  understood  and 
proper  exchange  reserves  are  set  up  against  possible  losses. 

How  Goods  Are  Being  Sold  in  China 

There  are  three  methods  that  are  being  employed  by  American  firms 
in.  selling  goods  in  China.  The  first  of  these  methods  is  representation 
by  trading  companies,  but  the  usual  arguments  against  the  use  of  trad- 
ing companies  apply  in  the  Chinese  trade  as  elsewhere.  These  companies 
represent  a very  large  number  of  lines  and  are  consequently  unable  to 
push  each  individual  line  to  the  best  advantage  and  trading  companies  of 
nationalities  other  than  American  are  quite  often  inclined  to  advance  the  in- 
terests of  their  own  nationals  at  the  expense  of  the  interests  of  Americans. 
When  trading  companies  are  used,  American  firms  should  maintain  able, 
experienced,  traveling  representatives  in  the  Far  East  who  will  check  up  the 


33 


trading  companies  and  help  to  popularize  the  American  goods  that  are  be- 
ing offered  for  sale. 

The  second  method  that  is  being  used  by  American  firms  is  the  establish- 
ing of  sales  branches  in  China.  The  usual  advantages  of  this  method  apply 
particularly  in  China  where  so  many  local  conditions  must  be  understood. 
Branch  sales  offices  should  be  started  in  a small  way,  should  be  in  charge  of 
high  class,  well  educated  representatives  and  the  home  concern  should  realize 
that  it  is  vitally  important  for  them  to  back  up  their  Chinese  branch  in  every 
possible  way.  Chinese  specifications  should  be  followed  and  no  attempt  should 
be  made  to  induce  the  Chinese  to  adopt  American  specifications.  All  of  the 
prejudices  and  special  requirements  of  the  Chinese  market  should  be  given  the 
most  careful  attention  and  absolute  satisfaction  both  in  connection  with  the 
goods  and  with  the  time  and  manner  of  delivery  should  be  striven  for.  It 
should  not  be  forgotten  that  government-backed  Japanese  competition  is  very 
close  to  this  market  and  any  dissatisfaction  on  the  part  of  the  customer  may 
send  him  into  the  Japanese  fold.  Furthermore  the  competition  of  Europe  is 
fairly  strong,  the  Germans  enjoying  very  strong  friendships  in  China  and  having 
recently  been  able  to  quote  very  low  prices  due  to  the  condition  of  mark  ex- 
change. American  business  concerns  that  establish  branches  in  China  should 
in  most  cases  expect  to  lose  money  for  the  first  two  or  three  years  until  their 
business  interests  become  thoroughly  established. 

American  Factories  in  China 

The  third  method  that  is  being  adopted  by  some  American  firms  is  the 
opening  up  of  local  factories  in  China  in  much  the  same  way  as  American 
firms  have  established  branch  factories  in  Canada.  This  would  appear  to  be 
the  one  best  bet  in  China  for  American  manufacturers^  Many  lines  of 
American  goods  cannot  be  sold  in  China  because  the  people  are  unable  to  pay 
the  price,  but  by  establishing  factories  in  China  prices  can  be  brought  down 
to  a point  that  is  more  nearly  within  the  reach  of  the  Chinese  public.  The 
establishment  of  such  factories  will  not  take  employment  away  from  Ameri- 
can workmen  because  the  business  secured  by  these  branch  factories  in  China 
will  be  almost  entirely  new  business  that  could  not  be  secured  at  all  except 
through  the  opening  up  of  these  factories.  The  best  results  will  be  obtained 
by  those  lines  in  the  production  of  which  labor  represents  the  largest  element 
of  cost  and  for  the  production  of  which  necessary  raw  materials  can  be  readily 
obtained  in  China.  In  America  the  elements  of  cost  in  the  order  of  their 
importance  are  labor,  supervision  and  materials.  In  China  the  order  is 
reversed  and  the  elements  of  cost  are  materials,  supervision  and  labor.  Chinese 
factory  labor  is  now  being  paid  from  nine  to  fifteen  Chinese  dollars  per  month 
for  a twelve  hour  day.  This  would  be  equivalent  to  from  four  dollars  and  a 
half  to  seven  dollars  and  a half  United  States  money.  Many  women  and 
children  are  also  employed  and  they  are  paid  what  would  be  equivalent  to  from 
three  dollars  to  four  dollars  in  United  States  money  per  month.  Higher  class 
labor  such  as  carpenters,  plumbers,  etc.  can  be  employed  for  the  equivalent  of 
thirty  cents  United  States  money  per  day,  the  number  of  hours  of  labor  varying 
between  ten  and  twelve.  While  such  a scale  of  wages  naturally  seems  to  us  to 
be  criminal,  nevertheless  the  usual  standard  of  living  is  so  low  in  China  that 
the  working  people  are  very  well  pleased  to  get  steady  employment  at  these 
wages  which  apparently  are  sufficient  to  cover  their  accustomed  requirements. 

The  supervision  of  labor  is  of  the  greatest  importance  for  the  working 
people  will  loaf  on  the  job  whenever  it  is  in  any  way  possible  to  do  so.  Con- 


34 


sequently  it  is  necessary  for  American  firms  to  send  over  able  American 
superintendents  and  to  also  send  over  American  foremen  or  else  care- 
fully train  intelligent  young  Chinese  to  become  foremen.  Some  Ameri- 
can concerns  have  educated  Chinese  foremen  in  their  American  factories 
and  have  then  sent  them  back  to  China  and  this  plan  has  worked  out  very 
satisfactorily.  It  might  be  a good  idea  for  American  manufacturers  who 
intend  to  enter  this  field  to  get  in  touch  with  some  of  the  numerous  young 
Chinese  students  who  are  attending  American  universities.  Many  of  these 
young  men  could  be  interested  in  a plan  under  which  they  would  go  into 
American  factories  as  soon  as  their  education  was  completed  and  later  on 
would  become  superintendents  in  China  for  these  same  concerns.  These 
American  educated  Chinese  make  very  intelligent  and  capable  superintendents 
and  managers  and  many  of  them  have  already  succeeded  in  building  up  pros- 
perous Chinese  industrial  undertakings  of  their  own.  The  industrial  develop- 
ment of  China  is  just  beginning  and  American  manufacturers  will  make  a great 
mistake  if  they  overlook  the  manufacturing  possibilities  here. 

Some  people  feel  that  the  industrialization  of  China  will  bring  forward  the 
real  Yellow  Peril.  They  feel  that  the  development  of  the  raw  materials  and 
cheap  labor  of  China  will  swamp  the  world  with  cheap  products  and  they 
consequently  urge  that  we  do  nothing  to  help  Chinese  industrial  development. 
However  these  fears  are  not  well  grounded  for  the  industrialization 
of  China  will  bring  prosperity.  Prosperity  will  bring  rising  prices  and  rising 
wages  and  production  costs  will  gradually  tend  to  equal  production  costs  in 
other  countries.  We  used  to  hear  that  industrial  development  in  Japan  was 
going  to  injure  industry  in  all  other  countries  but  industrial  prosperity  in  Japan 
has  resulted  in  rising  costs  and  in  some  lines  the  Japanese  are  already  complain- 
ing about  the  competition  of  Europe  and  America.  The  same  tendency  will 
surely  develop  in  China  as  the  years  go  by  but  in  the  meantime  large  profits 
will  accrue  to  the  American  manufacturers  who  help  to  bring  industrialization 
about  and  the  development  of  a prosperous  China  will  create  new  demands 
for  the  products  of  American  factories  and  American  labor. 

American  Chambers  of  Commerce 

In  the  development  of  American  foreign  trade  great  assistance  can  be 
rendered  by  American  Chambers  of  Commerce  located  in  countries  through- 
out the  world  and  it  is  interesting  to  note  that  American  Chambers  of  Com- 
merce have  been  established  in  many  important  Chinese  cities  and  plans  are 
being  made  for  holding  a general  meeting  of  representatives  of  all  of  the 
American  Chambers  of  Commerce  in  China.  These  American  Chambers  of 
Commerce  feel  that  they  should  have  more  support  from  the  Chamber  of 
Commerce  of  the  United  States.  Our  National  Chamber  has  co-operated 
loyally  in  organizing  an  International  Chamber  of  Commerce  for  the  purpose 
of  looking  after  the  general  business  interests  of  all  nations.  Would  it  not 
be  wise  for  our  National  Chamber  to  also  organize  a League  of  American 
Chambers  of  Commerce  in  Foreign  Countries  for  the  purpose  of  advancing 
our  own  American  trade  interests  throughout  the  world? 

Investments  and  Development  Work 

In  a country  like  China  the  investment  of  money  will  result  in  develop- 
ment work  being  contracted  for  with  citizens  of  the  country  from  which  the 
money  comes.  Americans  should  consequently  be  interested  in  possibilities 
for  the  investment  of  American  capital  in  China.  We  naturally  think  of  three 

35 


fields  that  we  imight  enter,  first,  loans  to  governments  or  provinces  for  the 
development  of  railroads  and  natural  resources  and  the  construction  of  public 
improvements  and  utilities;  second,  investments  in  industrial  undertakings; 
and  third,  investments  in  connection  with  the  construction  of  office  buildings, 
hotels,  store  buildings,  private  houses  and  the  general  rebuilding  of  the  country. 

Loans  to  the  government  and  the  provinces  have  been  under  consideration 
by  the  so-called  Consortium  made  up  of  groups  of  bankers  from  the  United 
States,  Great  Britain,  France  and  Japan,  the  United  States  group  consisting 
of  a considerable  number  of  our  leading  financial  institutions.  This  Con- 
sortium has  the  support  of  the  four  interested  governments  and  it  was  planned 
that  it  should  handle  such  loans  as  have  the  guarantee  of  the  central  govern- 
ment of  China  or  any  of  the  provincial  governments  and  which  are  to  be  offered 
for  sale  to  the  public.  It  was  not  contemplated  to  eliminate  private  en- 
terprises or  the  activities  of  financial  or  industrial  corporations.  However  the 
international  situation  in  the  Far  East  and  the  domestic  political  situation  in 
China  have  interfered  with  the  formulation  of  plans  for  loans  by  the  Consor- 
tium. It  is  hoped  that  the  Washington  Conference  may  imake  possible  some 
activities  along  this  line. 

Investments  in  the  industrial  development  of  China  are  being  made  by 
American  concerns  right  along  and  it  is  desirable  that  many  more  of  these 
investments  be  made  in  the  various  treaty  ports.  There  is  a broad  field  for 
this  type  of  investment  and  as  the  years  go  by  this  field  will  become  even 
greater.  Americans  should  not  overlook  the  opportunities  for  investment  along 
this  line  at  the  present  time. 

Investments  in  connection  with  the  rebuilding  of  China  must  await  future 
developments  although  there  is  some  field  for  activity  in  some  of  the  treaty 
ports.  After  industrialism  has  developed  somewhat  further  there  will  arise 
a demand  for  new  buildings  and  construction  and  it  will  be  time  enough  to 
consider  the  investment  of  money  along  this  line  when  that  time  arrives. 

Careful  Study  of  Far  East 

The  war  led  to  the  development  of  a very  large  capacity  for  production 
in  America  and  it  is  going  to  be  necessary  for  us  to  give  very  much  more  at- 
tention to  foreign  trade  than  ever  before.  Fortunately  for  us  our  large  pro- 
ducing capacity  is  backed  up  by  large  financial  resources  and  about  the  only 
thing  we  seem  to  lack  is  experience.  It  is  consequently  of  great  importance  to 
our  country  for  every  business  man  to  devote  some  time  to  study  of  foreign 
conditions  and  to  travel  in  foreign  countries.  In  this  connection  the  principal 
nations  of  the  Far  East  are  surely  among  those  countries  that  should  have 
our  most  careful  interest  and  consideration  and  it  is  to  be  hoped  that  the  results 
of  the  Washington  Conference  will  encourage  Americans  to  take  an  important 
part  in  the  future  development  of  that  part  of  the  world. 


36 


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